Shootin' the Bull about emboldened producers
“Shootin’ The Bull”
by Christopher B Swift
10/1/2025
Live Cattle:
Cattle feeders got a look at what an even wider spread, between starting feeder and finished fat, would pencil out to when the spread between November feeders and April fats traded a new historical width this morning. Projecting a significant loss, it brought into question how badly someone wanted to own them. When I saw today's trade from OKC west, it appears that the futures trader was much more gamey than cattle feeder. The immense volatility and width of basis spreads has left a lot of room for error. Cattle feeders hold a small discount to back months, but have lost the once $18.00 to $20.00 advantage held in the spring of '26 months as futures traders pushed March to within $1.275 of last Tuesday's high, and only $3.85 from contract high. Therefore, the advantage of basis has swung back to the favor of the backgrounder with an $18.00 to $20.00 less of a discount and current basis spread of approximately $16.70. I know that is still very wide, but Chris Robinson made a good point. That being, view the spring months from the gains they have made and not the loss from contract high, or basis width. From the July 2 low, March has gained over $58.00. That is what needs protecting for backgrounders.
Two things. One, I believe the length of time this issue has been on going, and fundamental's of lesser supply, has emboldened more participants into thinking the price can't go down. Two, I believe that corn is an example of how bullish it may be at the moment, but when deeper into the future, the highs of the future price of corn were nowhere near spot at the time, and ended up being the contract high for corn 3 years later. I can't recall a larger price expanse move in cattle than the past 9 months. Everyone knows that cattle and beef are short in supply with significant price gains helping to ration both consumer demand and industry participants. The alternative breeding of the beef/dairy cross, and competing meat proteins helping to fill large gaps in beef production, are believed helping to reduce the impact of shorter beef supplies. Maybe seemingly only minor, but imagine if not available. I remain perplexed as to whether cattle will make a new high in futures, or cash, but I have no reservations at all in expecting that a commodity can decline by greater percentages than may be warranted. What I believe most of all, is that any further price advance in feeder cattle will not necessarily be with the intentions of profitability, but simply to make sure no one else gets the cattle.
Feeder Cattle:
It seems that with no knowledge of a higher cash trade in feeders, and the announcement of a new drug for the screw fly, it is more likely than not that humans sold the market on the opening and computer generated algorithmic programs just simply pulled offers. I believe that algorithms play a huge role in price fluctuation and have the ability to detect when selling volume slows, then go to work on placing offers that are pulled upon the price reaching that level. This can tend to impact a human and they swap their order from a limit to a market, just to find where the real market is. Regardless, I think today was a short covering day, and it did make me think twice about a new contract high, as admitted to, in my comments on the Mid Day Cattle Comment. For now, I have no idea if cattle feeders will continue to outbid their competitor for market share. What I do know is that if, or when, they do, the price of feeder cattle will be expected to decline sharply in price, and in a very short time frame. Between the fundamentals, basis spreads and discounts to back months, cattle industry participants have no room for error.
Corn:
July corn reached the top end of a level that I recommend owning the $4.80 July corn call options. This is a sales solicitation. This has little bearing on me thinking corn prices will move higher, but a hedge that will set a price for corn input costs into the summer of next year. Setting some parameter's on input costs are believed crucial due to price being paid for the feeder steer. Beans bounced after the President announced a meeting with Xi in 4 weeks, with beans being a topic. This factor may keep grains trading in the same range for a little while longer.
Energy:
Energy was lower again today. Baffling is what trading energy is like. Today's ADP report showing fewer jobs, when expected more jobs, seemingly put a softer undertone on energy. Recession can be a killer of energy prices and with the ADP report and price action of energy, recession is looking more favorable than inflation. Regardless, stagflation is here to stay for a while. I continue to anticipate energy to trade. A trade of December heating oil (diesel fuel) under $2.25 will begin to sway my analysis.
Bonds:
Bonds were higher after the significant miss of the ADP report guess. Although very sluggish in their movement, I anticipate bonds to continue to trade higher.
“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.