“Shootin’ The Bull”

by Christopher B Swift

​7/24/2025

Live Cattle:

A slight reprieve from the buying prior to Friday's on feed and semi-annual inventory report.  A small amount of feed back is helping to form opinions.  One of which is that most anyone outside of a vertically integrated supply chain, appears to be buying cattle at retail prices (sale barn) and only able to market out into the future at wholesale (futures), if that.  This leads me to believe that there could be a stark contrast in profit potential and risk assumed between those inside and those outside. 

It was brought up in conversation again of today's cattle market being similar to corn at $8.00, with some saying closer to $9.00.  I think this is a lot more significant than most think due to corn not being a readily consumable item, and tends to not have much price impact from anything a consumer does.  Corn is a commercial grade feed source and now bio-fuel.  Sweet corn production differs so greatly, it is not considered a part of the US corn crop.  Beef though is readily consumable with little preparation before could be consumed and 100% impacted by shifts in consumer demand. The seeming sole reliance upon the consumer is getting a little sketchy.  I am hearing more about Main street than Wall street when it comes to the consumer, and even with job growth being reflected, it seems that maybe some are having to go back to work.  Top or not, the risks assumed are significant, and believe that large portions of profits are being reinvested in more expensive inventory, leading to higher averages having been paid for feeder cattle. This harkens to the Vegas craps table of "let it ride".  Therefore, with the already steep haircut of futures contracts, and historical highs for incoming inventory, cattle feeders are believed assuming the weight of the industry.  All of this to say that with futures contracts at like price levels out to April, put options premiums of 3.5% to 4.2% are available to secure a floor underneath the most expensive feeder cattle in history, at the widest spread between starting feeder and finished fat, and in a time frame of the consumer believed impacted by significant inflation.  Think about who you are competing against, can you compete, and to what extent of risk are you willing to assume to compete?  

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Feeder Cattle:

​I think just reading the above would have many thinking about whether or not some can continue to compete.  I believe the higher price, excitement the sale barns are creating, and greed and fear may cause some to over extend themselves in capital requirements to remain in the cattle feeding business.  In my opinion alone, consolidation is the agenda of cattle feeders and those in the beef market are helping in their attempt to strengthen supply chains into the future. With the feeder cattle sector, and all under, able to mitigate risk at even, premium, or slight discounts into the future, the risk of potential adverse price fluctuation can be managed at significantly narrower basis spread than in fats.  At the moment though, the industry is seemingly in much greater fear of missing out, than being run over by an adverse price.  I would be a little surprised if traders were able to push prices to new contract highs prior to Friday's report.  However, I do expect traders to make both bulls and bears uncomfortable going into Friday's close. All that has to take place is cattle feeders continuing to compete.    

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The August feeder cattle contract has limited time now.  I recommend for a purely speculative trade to buy August at the money feeder cattle puts.  This is a sales solicitation.   

​Corn:

All turned higher by the close. Grains may not be going up, they are not moving lower in quick fashion either.  No doubt the corn supplies will be hefty, if not somewhat burdensome.  However, demand continues to surprise many and even though in seemingly great shape, corn is not in the bins yet.  Beans continued higher today and I recommended buying November of '26 beans with a sell stop to exit only at $10.38. This is a sales solicitation. I anticipate beans to trade higher.  

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Energy:

​Energy was mixed with crude higher and the products soft.  Of interest is the reopening of Chevron in Venezuela to resume oil production.  Crude sold off hesitantly on the release of this, and after a hard swallow, traded back to the high of the day.  I anticipate energy to continue higher.  The President is facing stiff resistance to drill from companies as their desire to keep oil elevated differs greatly from his.   

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Bonds:

Bonds have seen both sides of unchanged today. New home sales were higher and jobless claims a little lower, reflecting the persistent stagflation.  I think there is still underlying inflation of local, city, and state taxes, insurance on everything, and services of electrical, plumbing, carpentry, & HVAC that is not counted in economic calculations.  Recall there have been few price declines, only rising at slower rates.     

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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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