Commentary by Ben Rand.
BenRand@BlueLineFutures.com
What a year for cattle. From setting all time contract highs back in Sept, to a $55 sell off in 8 weeks, to now new contract highs in the deferred months. A roller coaster for sure. Below is a chart of the October feeders and its is impressive at a bare minimum. With a nearly perfect v formation, the cattleman, especially the cow/calf operator will be wildly rewarded for his work. That being said, it is obviously prudent to begin looking at hedging feeder cattle that will be destined for market in Q3/Q4 of 2024. Why the run up? Well, several factors, the most important of which was a friendly inventory report yesterday that only confirmed what we already knew to be true: we have small herd.
On the back of the feeder recovery, we are seeing fat cattle continue the march upward, albeit not at the same rate as the feeders. Which poses the question: if a feedlot is buying feeders at $274 for pen space in oct, how does he make any money on them when the fats are only bringing $194 in April of 25? The reality is this math simply doesn’t work. Which means a correction is due. What that correction will be is the million-dollar question. Do feeders set back, do fats skyrocket higher, or does the cost of gain plummet lower? All unknowns, and likely will be a combination of all three. Path of least resistance I’d have to think would for feeders to slow their roll.
Speaking of CoG, lets look at the corn. Exports remain dismal, and the farmer had clearly shown his hand by the number of unpriced bushels on farm and in commercial storage. I’ve traveled every one of the WCB states in the last 6 weeks, and aside from the small drought-stricken area of East Central NE, there are corn piles everywhere. Where a bunker doesn’t have corn, it has milo. The material fact, like it or not, is that the fringe acres mattered this year, and they mattered in a big way. Does this mean I’m bearish corn? Not really. I think we’ve done the damage for now, the board has sold off, and we will continue to trade a range. Lets call that inside range on the CH4 436.00 to 455.00 and the outside range 402-517. Keep our eye on etoh margins and a possible uptick in demand off the NOLA as river levels continue to improve.
Recent projections for soybeans in SA have really put a damper on things. We have seen plenty of 147-150mmt estimates for Brazil, which means there are plenty to go around. To have a meaningful impact on the carryout and S-t-U Brazil would have to come in at or below 133, which at this time simply doesn’t seem possible. And with the weather threat in Argy being off the table for now, It appears beans will be capped on any upward movement. I’m looking for an inside range on the SH4 of 1188.00-1288.00. There is an overhead gap at 1299.75 that if filled, must absolutely be considered for moving unpriced bushels.
About the Author
Ben Rand is a Series 3 Commodity Broker, Series 30 Branch Manager and Licensed Insurance agent in over 20 states. Prior to his entrance into risk management, Ben was an Intelligence Collector for the department of defense and is fluent in Dari, Farsi and Arabic. Ben has held Commodity Broker and Branch manager positions within Cargill and now Blue Line Futures. During his time at Cargill, Ben also originated grain into various Cargill assets and their joint ventures across the western corn belt. Since 2014 Ben has filled several roles in Risk Management to include agent roles at his family-owned agency and The Home Agency. Ben has been committed to helping educate and provide risk management solutions for Livestock and Row Crop producers across the nation.