“Shootin’ The Bull”

by Christopher B. Swift

​7/16/2025

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Live Cattle:

​Cattle feeders pushed the spread between starting feeder and finished fat to within $1.15 of the spread width high of $105.80 when viewing September feeders and February fats.  Cattle placed today, via the index reading and the December fat contract, remains above $100.00, but has softened slightly from the $106.72 high.  Cattle feeders are fighting for market share, assuming risks of significant projected losses, in an exceptionally wide positive basis.  All of this to the benefit of backgrounders and all sectors below.  While most likely impossible to calculate, but in my opinion, I believe that the shortage of animals is not nearly as great as is the number of animals no longer available to the open market. I think it is possible that as much as 20% to 30% of inventory previously available prior to 2023 is tied up into a vertically integrated supply chain.  I say that simply due to the number of cattle on feed has yet to drop below 11 million head on feed in over 32 months now, and cattle feeders continue to bid higher for inventory.  I think this is a reflection of too much capacity for the number of animals available and those with excess capacity assuming significant risks to achieve capacity.  

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An issue to watch for is the similar stance farmers are believed in. That being, have expanded in multiple different manners in a time frame of lose money and high corn prices.  At the high's of '22, each year's December contract month was discounted sharply into the future with the December of '25 corn trading at $5.58 when December of '22 was nearer $8.50.  I perceive that with gratuitous government subsides, current profit margins, and supply issues relevant, producers are forecasting the ability to conduct business at these price levels for quite some time.  While prices may be able to be sustained, it is difficult to prove historically in most any commodity market.  Just something else to have to consider.  ​As stating the obvious has no bearing on price fluctuation, the comments may help some in making a more informed decision going forward.   

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The wave count has extended a couple of times for which previous highs were believed a top. When viewing the October contract below, I have had to change the wave count due to the further extending of the waves.  Note though that with the major wave change, the minor wave of the 5th wave has now unfolded into 5 waves as well.  While I have no reservations on further higher movement, the new high leads me to recommend again to take action on marketing's.  Even with the extent of the positive basis, this is currently the best price available into the future.   

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Feeder Cattle:

Futures traders are helping in every way possible to offer a narrower basis, even, and on the front end, negative.  While there is expectations of higher cash that may influence the index, at the moment, futures traders are offering aspects of managing risk not found anywhere else.  Put option premiums remain well within the 3.5% to 4% value of the contract.  Note the comments above and the current plight of the cattle feeder. Their aggressive stance to garner market share is exceptional.  Not only does it have to stay exceptional, but at some point in time, these historically placed feeder cattle will have to be sold as fats, at a significantly higher price, that has yet to be discovered, in order to profit.  Again, this is an exceptional time frame. 

Similar to the fats, feeders are believed in their 5th wave as well.  However, only the November and next years contract months have made a new contract high, suggesting the 5th of the 5th wave in progress.  I have little to no reservations of traders pushing this years remaining contract months to a new contract high.  However, like above, I think it will bring the top closer than suggesting to anticipate further significant gains.  As well, note that the spread between feeders and fats is grossly unfavorable to cattle feeders, leading me to expect them to have to do something dramatically, were their position in the current scheme of things to change.  As the cattle feeder is the one pushing the extremes, and futures in lock step with, I recommend you take full advantage of both while it lasts.  

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​Corn:

There still isn't  much to discuss in grains, but all were a little higher today.  It's beans that have my undivided attention and today's price action leads me to believe a bottom has been put in for beans, at least for the time being.  August will be the month that makes or breaks the bean crop and there are 4.5 million acres fewer of them.  Note the November of '26 got a good head start today with expectations of this market buying acres into next year.  I continue to recommend soybean farmers own the $11.00 and $12.00 November '26 soybean calls. This is a sales solicitation.  

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Energy:

​Energy was soft for most of the day, but at the close, crude turned plus and the products regained most all of their losses.  I anticipate energy to continue to trade higher. ​

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Bonds:

The bond and equities market did not take it well when rumors of President Trump firing Fed President Powell circulated this morning.  All sold off sharply as it appeared division between branches could be colluded.  Within a few minutes, those rumors were squelched and both regained losses.  The volatility created, in most all markets, by the President's on again, off again tariff's, threats, and to some extent actions, have not been beneficial to most producers.  I say that due to an unfortunate aspect that not everyone can remain calm, cool, and collective during extreme bouts of volatility.  Therefore, it is possible that products are bought too high or sold too low, simply due to the speed in which some decisions are having to be made.  Copper is an example of this for which in April, fell in 3 days 17% on tariff announcements.  Not to be out done, on the 8th of this month, further tariff actions produced an 18% gain in one day.  Producers and end users both having to deal with near 20% price fluctuations in days, or a day, is phenomenal risk to be managing for anyone and opens Pandora's box to a plethora of issues for each in profit margin calculations.  The President has only touched on cattle/beef issues.  I can only imagine what may take place if he actually in acts any form of meddling into the cattle or beef markets.  Recall last weeks differing opinions between cattle associations for which one praised the opening of the border while the other equally praised the reclosing of. There is tremendous tension being built in the cattle and beef markets.   ​​​

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 “This is intended to be or is in the nature of a solicitation.”  Futures trading is not for everyone. The risk of loss in trading futures can be substantial; therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not indicative of future results, and there is no assurance that your trading experience will be similar to the past performance.

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