“Shootin’ The Bull”

by Christopher B Swift

​10/31/2025

Live Cattle:

In my opinion, another week of Wow's.  Limit down one day and limit up the next, with no more credible news than last week. With the severity of the break lower, there are now some similarities that can be drawn between the 2014 & 2015 top and at present.  In 2014, it was estimated that cow/calf producers not only held back heifers, but kept back old cows for which if they thought could go through gestation, even if the cow died during birth, the calf was worth $800.00 at the time and the kill cow $300.00, resulting in a $500.00 profit.  Upon recognition of an exponential birth rate coming, the price of feeder cattle sold off $38.75 from 12/14 to 3/15 via the CME index.  Ah, but the cattle weren't there yet and the price rallied for feeder cattle $25.06 from 3/15 to 6/15 before plummeting $111.82 from 6/15 to 10/16.  This time, the sharp break lower did not come on the heels of US expansion, but from imports.  When announced on October 16 that the President intended on keeping his promise of lowering beef prices, by importing Argentinian beef, and followed closely by rumors of reopening the US border to cattle, the price dropped between $40.00 to $60.00 depending on contract month, and so far $28.89 on the CME index.  Since the announcement, not one more ounce of beef or head of cattle has been imported.  Potentially, this month has produced the initial thrust lower in anticipation of increased imports, but still waiting for when, where, and how much.  The next few weeks are believed going to be the calm before the storm. Maybe similar to a hurricane where the front of the storm is bad, the eye is calm, and the back side does more damage due to the front of the storm having weakened infrastructure. I anticipate the next few weeks to be the eye of the storm and produce a calmer trade as details of any imports of meat or livestock are made.  Due to my belief that the President's track record is pretty good on achieving goals set out to accomplish, I believe he will continue to work towards importation of beef and or cattle, whether he can accomplish it or not.  

 

What can be done now?  It depends on where you stand now.  If nothing has been done in managing the enormous price risk producers were assuming, the unfortunate is the market has already made a substantial price move lower and may or may not move back towards previous higher price levels. This scenario would lead me to draw a line in the sand that were a certain price to be exceeded lower, one would capitulate and buy the at the money put, or purchase an LRP policy.  Both of which subject you to extensive basis risk.  In the interim, calculate what the lowest price you could live with is, and were prices to trade higher, make your marketing decision there. For those already hedged the market with substantial open position equity, consider only buying a call option if attempting to capture unrealized profits in any of the derivatives that may have been used.  I say that because of the Delta factor of options and knowing that if you buy the call option, your risk is the premium paid for the option with still a net short position on, that won't be hampered but by the premium you pay for the call.  If prices move higher, you may or may not benefit from call option gain, but most likely not by as much as put option decay.  If prices move lower, you will remain net short with an increase of your short position once the premium of the call is exhausted.  I understand there are a lot of "ifs" in this comment, however,  that is where we stand in the industry, a lot of "ifs".  

 

Where can the price go?  Here we go with the "ifs" again, but if the cattle market follows any sort of what may be considered normalcy in a commodity market, a correction of the price increase would be anticipated.  If using the short rally from 9/24 to 10/25, retracement levels on the CME index are between $309.00 and $293.00.  I think these levels could be met with one of the three spring contract months.  If using the entire rally from 2020 to 2025, just a 50% retracement is going to be at around $246.00.  I think it would take the August, September, or October contracts to reflect this significant of a correction on the futures. If wrong on a correction materializing, and the border remains closed to cattle, high tariffs discourage imports of beef, a pretty good idea the consumer is already balking on retail beef prices, and deep negative margins to processors, I would anticipate significant destruction of production and processing capacity with the outcome being what no cattlemen wanted, total vertical integration.  

 

Grains were steady on the week with soybeans sharply higher on another one of the President's goals met. Energy moved higher and has remained there.  Diesel fuel continues to lead the way.  Bonds were lower after the FOMC meeting.  Discrepancies are showing up and I am unsure there is a stronger side than other at the moment.  I think the President sees the same thing as what multiple CEO's have stated recently in that the economy is softening.  Therefore, he is attempting to stimulate the economy with lower rates and a trick pulled from the Biden era's hat with student loan forgiveness.  All the while it appears that warning signs are being fired across the bow.  The more CEO's, with exceptionally accurate sales data, lean towards the two-tiered economy, I am to.  I think it is as simple as there has been so much money printed, there are a lot more wealthier individuals who may or may not have the wherewithal to keep it, but are spending at an elevated rate that may mask some of the lower spending by those not as wealthy.  Lastly, I find it interesting, and somewhat abhorring, how the poor are held hostage by governments that feed them and starve them in order to achieve a goal that is not believed to have anything to do with them. 

​

Feeder Cattle:

​

​Corn:

​​

​

Energy:​

​

​​​​​​​​​

Bonds:

​​​​

​

 “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.

​​

​​

​