“Shootin’ The Bull”

by Christopher B Swift

​7/29/2025

Live Cattle:

As best I can find, it appears boxes topped on 6/27 at $396.49.  Cash cattle have risen approximately $10.00 since then with August futures up $15.60 in the same time frame.  This has put processing margins deep into the red.  At the same time that packers are losing margin, cattle feeders have continually widen the spread between starting feeder and finished fat. The short break in the spread the week after the July 4th holiday was quickly reignited pushing the spread out by another $8.53 when spreading the index against futures, and has widened by about the same when comparing starting September feeders to finished February fats.  The widening of this spread is causing two factors to materialize.  One being the sole reliance upon an ever increasing price for fat cattle, and two, causing some to be able to compete at such a wide spread.  So, both entities of processing and production have woefully too much capacity for the number of animals available.  As beef production continues to help offset lower numbers, the risks being assumed when viewing these spreads appears significant.  All this to say that risk in multiple facets have increased significantly with few ways to manage all of it.  I feel as if the industry as a whole is attempting to grind down production and processing capacity in an environment that is fighting change.  Hence the higher price of cattle and feeder cattle.  Processors are buying fat cattle with negative margins and cattle feeders are buying feeder cattle with negative margins. Both seemingly solely dependent upon an ever higher price.   

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Feeder Cattle:

​If there were ever a catbird seat, the backgrounders and sectors under are sitting in it right now with new highs in just about every category there is under fed steers. As cattle feeders are the ones believed attempting to garner more market share, by outbidding their competition, reliance on them continuing in such a manner is the only outlook for backgrounders to keep prices moving higher. Futures traders are in lock step with cattle feeders bid, with some out in front by a little. With basis having swapped to negative out to November, and January having narrowed over $7.00 to just $5.80 under the index, this change in basis leads to recommend newly acquired inventory, that will market in these time frames, to have a put option scotched tightly under the current price.  This is a sales solicitation. With all marketing recommendations having fallen short up to today, whether by me, or anyone else, the risk of not doing something to protect your cattle is believed much more than doing something at this level that still may not be anywhere near the top.          

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​Corn:

​Corn and wheat resumed down trends today.  Soybeans were soft, but they have a tale of two cities.  The bean meal is in heavy supply and the demand for bean oil is helping to keep it heavy.  Hence the demand for oil and not for meal is keeping bean prices stable.  

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Energy:

​Energy was sharply higher today with crude up over $2.50 and nearly a 4% gain on the day. This is a breakout to the upside of energy prices and believed the path of least resistance.  I recommend topping off farm tanks, booking fall harvest needs, or buying December call options in crude to help mitigate the potential for higher energy prices. I have believed for a quite a while that energy would continue higher.  After nearly 4 weeks of sideways trading after the bombs were dropped on Iran, crude oil is within in $2.00 of exceeding the previous closing high and at new highs from the lows created from the bombing.  Energy is moving higher.      

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Bonds:

Bonds higher as well.  I am unsure why with energy higher, new home sale indices higher, and consumer confidence on an up tic.  Trade deals have been negotiated and inflation seems to be poised to rise again.  Stagflation appears to be turning back into inflation. 

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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.