“Shootin’ The Bull”

by Christopher B. Swift

​7/9/2025

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Live Cattle:

In my opinion alone, and not to be confused with fact, enough vertical integration is believed to have solidified that those outside of are having a difficult time competing at current price levels.  I can only assume that within a vertically integrated supply chain, risk is spread out over the entire chain, and not to just the cattle feeder.  If so, in order for others to compete, it appears that some are assuming risks for which may or may not be able to be managed. Of the only factor I can think of that this situation creates, without much question, is that reliance upon an ever increasing price rose significantly over the past 4 days.  During this time frame of consolidation of the industry, through vertical integration, garnering market share appears the goal.  I think this is being achieved.  

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Basis spreads are wide and at a significant disadvantage towards cattle feeders.  The spreads between contract months reflect bull spreading, but that just makes the spreads wider, and potentially creates a worsening basis for cattle to be delivered in those months.  The spread between starting feeder and finished continues to widen in a manner not conducive to profit margin.  The spread between boxes and fats have been teetering back and forth along the profit margin line.  Today's price action of lower boxes and higher futures, or no less cash price so far, tips the packer margin back into the red. All of the above has little to do with foretelling the next most probable move, it simply continues to reflect the risks being assumed.  

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Feeder Cattle:

Cattle feeders are assuming significant risks through acquiring inventory at a premium with only discounts of fats to hedge or market into.  Not the backgrounder though, or any sector underneath.  Futures traders have stepped up to the plate and are offering to assume your risk at steady to premium over cash through the remainder of this year. While this has no bearing on if a cattle feeder will continue to bid higher or not, it is simply that if you decide to market today, you are able to do such with no discounts into the future.  If you do not wish to do such, and assume potential adverse price fluctuation on your own, you may benefit more by whatever the cost of an at the money put option will be if prices continue higher.  The current inverted spread of feeder cattle is not nearly as significant as is in fats, but below will show that there is great incentive to market inventory as soon as possible.  

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September at the money $320.00 put is approximately 2.4% of the value of the contract.

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October at the money $318.00 put is approximately 3.1% of the value of the contract.  Note the $2.00 discount from September to October.

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November $314.00 put is approximately 3.3% of the value of the contract and the $316.00 3.6%.  Note the $2.95 discount from October to November.

January at the money $308 put is approximately 4.3% of the value of the contract.  Note the $7.05 discount from November to January. 

My belief is that hindsight is causing some producers to assume more risk than can be managed.  Simply review everything above considering the spreads of what cattle feeders are having to contend with and attempt, however difficult it may be, to look ahead and not relish on the hindsight.   

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​Corn:

Corn traders clawed back losses to close plus on the day. Unfortunately, that was from a new contract low.  Whether prices continue lower or not, the corn crop appears in very good shape.  Beans as well for the time being, but even though stopped out of long positions today, I remain friendly towards beans, just not long.  

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Energy:

​Energy was able to make some headway today, but closed down on the day by a little.  Diesel fuel backed up the most, leading me to recommend topping off farm tanks or booking harvest fuel needs. I anticipate energy to trade higher. 

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Bonds:

​Bonds were higher today.  ​​

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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.