“Shootin’ The Bull”

by Christopher B Swift

​8/13/2025

Live Cattle:

Traders wanted a second glance at the contract high made last week.  Although potentially a little timid to push right on through it, they got an up close look before backing off.  The volatility and price expanse is expected to remain, if not increase.  The combination of positive basis and option premiums creates a wide gap between what is available to day and any other time frame in the future.  Throw on top of that the ever widening spread between starting feeder and finished fat, and it is obvious the cattle feeder is assuming significant risks for which some are unmanageable with any derivative.  Why, because there is too much cattle feeding space for the number of animals to be fed.  Aggressive stance by some cattle feeders is believed a reflection of desire to gain more market share and have deeper pockets to withstand potential adverse price fluctuation than others.  Cattleman's foresight has come to fruition.  They have paid more for feeder cattle than any one thought by $100.00 over previous 2014 high and now it will lead to some not being able to participate in the cattle feeding sector of the industry. Two factors from out of the blue have helped to produce portions of this rally through the limit of imported animals from the south and tariffs on Brazil.  Both, actions of the government, for which can be overturned the next day if desired.  

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Protectionism and tariffs are issues that can produce results for those implementing.  However, it can also create resentment, as well as incentive to seek other opportunities.  

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Feeder Cattle:

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The challenge of getting ahead of the curve video.

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Cattle feeders are competing for market share, with some believed having deep pockets helping to provide the capital needed to enter into a negative margin feeding scheme and positive basis issues for hedging. Their unused pen space is growing, leading to someone not getting to feed cattle. As in both the fats and feeders, the spread between the two had another glance at it's contract high width of spread as well.  I have no idea to what extent someone will go to in order to have cattle on feed.  That is what is being determined at the moment.  With each new spread width or higher price of feeder's someone gets left out.  Any hint of the reopening of the border, repeal of tariff's on Brazil, or loss of a packer or feed yard , would be anticipated to pull the rug from underneath feeder cattle prices and test the limits of how deep the pockets of some may be.  There is little reason to have to sell anyone on risk management.  The risk of adverse price fluctuation under the current fundamental aspects is blatantly obvious. 

Futures traders continue to be of significant benefit in allowing backgrounders to transfer their risk of potential adverse price fluctuation at even money, if not premium on to a futures contract or option on a futures contract.  At the money option premiums can be purchased for 2.5% to 4.5% of the value of the contract, depending upon time.  Your consideration is believed, who do you wish to assume the risk of potential adverse price fluctuation, how much of it, and how much are you willing to pay for it?      

​Corn:

​Corn shook off the lower trade from the WASDE report, but most likely not for long.  Beans continued higher, but seemingly China filled a great deal of its bean needs from Brazil.  

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Energy:​

Energy was soft again with crude leading the way lower today.  Although diesel fuel and gasoline are lagging slightly, the crude oil made a new low from contract high today.  This helps to increase the probability of further downside movement.  

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Bonds:

​Bonds were higher today after a significantly volatile trading session on Tuesday.  Bonds moving higher and energy lower is believed a reflection of Main Street not doing as well as Wall Street.  ​

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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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