“Shootin’ The Bull”

by Christopher B. Swift

​5/12/2025

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Live Cattle:

Cattle feeders continue to see the best profit margin ever today, while having to replace with higher feeder cattle and input costs that project significant losses in the future, without further stupendous gains in the fat market. With boxes higher and fuel higher, consumers are expected to begin to see further commodity inflation for which has been declining since 2023, except beef. Interest rates are higher, because inflation is not going down and Tuesday's CPI report is expected to confirm this. Another tenth of a percent lower may be what is seen, but if commodity inflation does pick up, it will only go to drain the consumer faster of discretionary funds.  Cattle feeders have found themselves with woefully too much production capacity.  The halting of imports from Mexico exaggerated this a little, but in all honesty, few were crossing the border and hardly any ever made it further north than the Texas border with Oklahoma.  So, this aspect may blow over pretty quickly whether resolved or not.  With boxes higher, and this weeks slaughter the hamburgers and hotdogs for Memorial Day, I'll be anxious to see beef movement.  I had already seen steaks being marked down at Kroger's grocery store last week.  This weekend, Cosco had tenderloin steaks, 5 for $77.00 with an add that $10.00 would be taken off at the check out line. Nonetheless, and regardless of, the agenda to secure greater market share is upon us, and with no voluntary reduction of production capacity, involuntary appears to be the next step.  

Feeder Cattle:

​Cattle feeders are attempting to squeeze one another out in the attempt to grow or maintain market share.  Commodity squeezes are nothing new with great historical tendencies that reflect industries changing dramatically after such.  Silver went to liquidation only and darn near broke the Hunt brother.  Simplot with potato's, hogs vertically integrated by squeezing every producer out with prices way under cost of production, and most recently, cocoa and coffee saw an enormous squeeze on supplies, but both have subsided in price from their high.  In all fairness, cocoa is still a standout having risen over 1000% and still trading well above previous all time highs.  ​

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I heard someone mention that feeder cattle are no higher than they were in 2014 when adjusted for inflation.  If commodities were adjusted for inflation, no one could afford anything.  So, don't view this as they are cheap.  Profit margin is the key to any business and at the moment, the cattle feeder is working off margin that has yet to be produced. 

I recommend you continue to forward market newly acquired inventory in an attempt to keep from having paid a historical price today and market in the future at not a historical price. The clarity of hindsight is believed impacting decision making.  If you are having difficulties managing the risk now, it is not expected to get much better.  Regardless of derivative used, they all will limit your maximum potential to some extent.  Only foregoing risk all together will allow for maximum profit potential.  Unfortunately, most can't rely on an ever increasing price to profit from.  So, it appears that all in all, whether you want to use risk management tools, or forego and assume all the risk yourself, the capital expenditure is great and many are as displeased with the higher price, leaving them out of the game, as there are pleased, but increasing risks substantially.   With no voluntary contraction noted in either production or processing, obtaining or sustaining market share will be expensive.  

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Corn:

The WASDE report didn't show much.  New crop corn was able to remain plus on the day, most likely due to uneven planting at the moment.  I recommend cattle feeders own the $5.00 July '26 corn calls to help mitigate potential price fluctuation of this years crop.  This is a sales solicitation.  Anything a cattle feeder can do at the moment to fix or mitigate the price of input costs while low is highly recommended.  

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Energy:

​Energy was sharply higher and closed higher on the day.  I believe this is a reversal in energy prices to the upside.  The volatility has been immense in energy prices and have seen no variances of retail gasoline price during the volatile time frame. Consumers are not feeling day in day out lower prices.  They have seen about a $.50 to $.75 drop from a year ago, and now stagnate.  Again, any increase of energy price would be expected to impact consumer discretionary spending, and make cattle/beef input costs that much higher. Crude is a good $6.50 off last weeks low.  It missed exceeding two weeks ago high by a little over a dollar.  Now trading back above $60.00, I expect energy prices to move higher.  I recommend owning call options out to the October and December contract months.  This is a sales solicitation.  Strike prices and premiums will be determined upon how much risk you wish to offset or assume.  Fix variable costs when applicable, with feed and fuel believed applicably priced.   

Bonds:

​Bonds have been lower all day.  Down a little over a point at one time.  All bond and note prices were lower today with short term notes reflecting a pretty good rise in short term rates.  It will be more than interesting to see if bond and note prices begin to stagnate in this area, or move in a direction.  Of one thing, all markets have been subjected to a great deal of volatility with the back and forth Trumps agenda.  As that volatility subsides, trends will be expected to form.  Which direction appears elusive at the moment. ​​

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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.