“Shootin’ The Bull”

by Christopher B. Swift

​6/02/2025

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Live Cattle:

This week starts a bullish Moore Research seasonal tendency for cattle, feeder cattle and hog prices to move higher.  As prices traded counter to the February - May bearish seasonal tendency, further advancement will be considered follow through.  Now that the bullish seasonal is upon us, do we expect now another $30.00 higher, or potentially succumb to a second counter seasonal tendency in which prices trade lower through the summer instead of higher?  I don't know either as boxes trading at $366.00 will seemingly test the consumers resilience further.  

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I think the situation is as simple as, there is woefully too much production and processing capacity for the number of animals to be produced and processed.  Therefore, expect greater lengths of capital outlay, greater dependency upon an ever higher price, with a percentage of risk that can't be managed due to the positive basis.  Today's profits continue to stun most.  The losses projected for current placements is as stunning, reflecting an over $100.00 per head loss in just 150 days from now.  As producers are stretched even thinner, it leads me to anticipate some involuntary reduction in production capacity. 

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Feeder Cattle:

​The big video sales are around the corner.  This will put a tremendous amount more inventory on the market than has been available over the past few months. Not an increase over last year, just availability during the video sales. With the prices paid already, will the industry need another round of lending when we get to these sales?  More likely than not.  Combined with higher interest rates, more capital outlay will produce a greater need to protect what is at risk. Cattle feeders are assuming the lions share due to the wide positive basis.  Backgrounders have the benefit of the futures traders behind them, offering tight basis spreads, whether negative or positive, depending upon the contract month.  Whether one uses this to their advantage is up to them, but the market is offering you every means possible to protect a price that may or may not be available upon the physical marketing of your inventory.  I do not know to what extent one will place themselves to be in the cattle production industry, but it appears that we are in the midst of finding out.  Futures and options may or may not help, but the industry is going to go through some volatile price expanse.  As numbers tighten, the seasonal tendency turns north, and expansion in fledgling signs of taking place, some have muttered "you ain't seen nothin' yet".  That may well be the outcome, but just in case the ploy is to stretch some into untenable positions, pulling the rug from underneath can achieve aspects of lowering production capacity.   

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Corn:

​Beans couldn't get plus on the day and corn lost all of its gains.  Wheat was higher and closed higher, but well off the highs.  Grains and oilseeds are about as lack luster as any commodity there is at the moment. ​

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Energy:

Energy was sharply higher and closed higher, even after OPEC increased daily production by 400K barrels.  The unrest in the middle east, Russia and Ukraine, and the volatility of the current administrations actions on tariffs is creating a massive amount of volatility to contend with.  Producers are urged to manage what can be.  Energy and feed stuffs are two that are relatively low price levels with potential to trade higher.  Especially energy.    

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Bonds:

​Bonds were lower as inflation continues. Bonds are in a down trend with a trade above 113'25 September needed to suggest a reversal is taking place.  A trade under 111'05 September will lead me to anticipate new contract lows. ​

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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.