“Shootin’ The Bull”

by Christopher B Swift

​8/18/2025

Live Cattle:

With apparently no indication of the border being reopened, the narrative from last week shifts dramatically from expectations of more inventory to work with, to cattle feeders going into full competition for available inventory. Noting the price increase in the back month of feeder cattle, it appears that cattle feeders will have to compete at a much higher price, or potentially have to decide to not compete.  As well, today's price action makes for another new record spread between starting feeder and finished fat.  The border remaining closed will further pit feed yards against one another to draw in as much inventory as possible, with the south at a distinct disadvantage due to unavailability of product that has been readily available for decades, and a premium for fats traded in the north over south.  These two distinct factors will further sway great advantage to northern feed yards and cattle feeders.  None of the above is actually bullish fat cattle.  It is bullish feeder cattle, but with beef production still on the rise, exceptional availability of feed, and a belief consumers will shift in beef spending upon the foreseen price increases, it appears that the spreads between starting feeder and finished fat will continue to place great risk on to cattle feeders. 

Feeder Cattle:

Cattle feeders looked to where cattle were the cheapest, and up until Secretary Rollins didn't breath a word about the border reopening, the spring months was where they found them.  Cattle feeders have now increased the spreads between starting feeder and finished fat in almost all time frames with a futures contract to calculate from. Basis narrowed quickly after the first hour of trading this morning.  Barring an out of the blue reopening of the border, there is no more curve to attempt to get in front of.  Feeder cattle prices will be solely dependent upon the competition between southern and northern feed yards, with a perceived distinct advantage towards the northern cattle yards.  Lastly, it leads me to anticipate even more working capital than previously ever imagined due to the competition that may arise from this issue. 

None of the above leads me to abandon previous recommendations. The above fundamentals presents one of the more bearish aspects on the market, there is nothing bearish.  So, expect the unexpected, keep rolling up put option floors when applicable and when you buy more inventory, at the higher price, floor large swaths of inventory in an attempt to avoid potential adverse downside risk. 

Cattle feeders that must own cattle or else, may want to consider owning the long fence options spread in the March, April, or May contract months that would allow for ownership slightly under the index with the $20.00 window allowing for a $20.00 lower price in feeders before you could have bought them cheaper. I am not swapping from marketing to procurement at current price levels and spreads between starting feeder and finished fat.  However, I do recognize the other side of the equation and if you are going to have to compete, at least have something to compete with. This won't be a friendly competition. It is for market share, funded by deep pockets, with attempts to quell further competition.  ​​​

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​Corn:

​Barring September corn, the other months were a tad higher.  The known size of the crop makes marketing into next year a daunting task to say the least.  Although carry is nowhere near full, and options on corn not brining in much premium,  Beans and wheat were soft, but not by much.  ​

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Energy:​

Energy was pointed down hill until further negotiations with the Ukraine seemingly propped it up considerably off the low.  Diesel fuel made a new low in this decline, so it appears that lower is the path of least resistance with exceptional volatility.  I continue to anticipate energy to soften. ​

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Bonds:

Bonds were lower, with aspects of believed due to inflation climbing that is not reflected in government reports.  Bonds have traded back into the triangle from which it broke out of earlier this month.  Most commodity markets are trading range bound than higher or lower. Barring Friday's higher close in equities, today, cattle and feeder cattle futures are the only commodities at historical price levels.  This is a true testament of how distorted cattle and beef prices are to the rest of the markets and economy supporting such.    ​​​

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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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