“Shootin’ The Bull”

by Christopher B Swift

5/07/2026

Live Cattle:

There are a few factors that appeared today that may be some of the reason for the lower trade.  One is simply the importation of more beef, having set a record for in March.  A planned meeting between President Trump and the President of Brazil set the rumor mill on fire of potential trade deals or dismissal of tariff's. Neither of which is confirmed.  Most likely the reason is cattlemen are subjecting themselves to risk for which few want to help manage. Case in point is from a sale in Valentine that brought $416.00 cwt on a load of 804# average steers.  Running the math is easy.  804 x $4.16 = $3,344.64.  To get to current average slaughter weight, 636 pounds need to be gained with most likely that running into December.  Today's price of December futures closed at $239.45.  1,440 x $2.3945 = $3,448.08.  Placed at a cost of $3,344.64 and finished $3,448.08 suggests a cost of gain at approximately $.16 per pound to break even.  If cost of gain is about normal at $1.13, shown on the Cattle Range, a breakeven cost of December needs to be around $282.00.  In my opinion alone, it is this form of participation in the cattle markets that leads me to believe not everyone is as optimistic others. 

 

Why is cash bid higher and futures plummeting?  Because there is way too much processing capacity, and even with large imports of beef and waning consumer demand, there are contractual agreements to fulfill and if not, we know how that story ends. Hence, some packers, whether they want to or not, will have to out bid their competitor to meet their obligations.  Futures traders have piled in last week, offering a helping hand to manage your risk at exceptionally tight basis spreads and price proximity of new contract highs. Today, they may seem to showing some reserve in assuming your risk at narrower spreads.

 

Lastly, something to watch for, there has been a significant increase in open interest in the fats, but not the feeders.  A squeeze is seemingly more likely in the fats than feeders, due to physical delivery of futures and limited number of cattle to be slaughtered per week.  I think it possible that the last several thousand contract increase of open interest is not by the funds or packers, but by cattlemen.  This may be difficult to prove until next week when the commitment of traders is released, but I have little reservation in making this assessment.    

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​Feeder Cattle:

The congestion within the industry, that has been building from the center of the plate up, and all of the above, is most likely why cattlemen continue to bid higher for inventory and everyone else skeptical. As expected, volatility and price expanse are immense. There has been little, if any, increase of open interest in the feeders.  If cattle feeders were concerned, I think they would be buying back month feeders with all they had.  They are not and the inverted carry price structure of the board will continue to have producers paying top dollar today for incoming inventory, with only discounts to market into in the future.  None of the above is a sob story or anything of the such, it is the recognition to get something done when pricing is more advantageous than at other times. Today's lower index reading softened the width of basis spread today with futures sharply lower.  Even at current discounts of futures, you can minimize the basis spreads with options strategies that allows for full convergence of basis with some potential for a new historical high, were it to materialize in most months, and produce a higher minimum sale floor.  The advantage of marketing remains, but you still have to do something about it.  

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​​​​Corn:

​All ended lower again today.  Corn and beans were able to pull well off lows prior to the close.  Wheat remained at the bottom end of its trading range.  All are believed to have completed what is thought to be a minor correction in a larger bull market. No doubt, the correlation to energy remains.  As energy reversed an enormous sell off, so to did corn and beans.  With anticipation of a higher trade in energy, grains and oilseeds will be expected to follow behind.  I anticipate all to continue higher.  Note that price expanse is still wide in the grains with a great deal of volatility that may jeopardize futures positions.  I recommend for cattle feeders to use this break lower in corn to buy call options in the December and July '27 contract months at strike levels you no longer wish to pay for corn.  This is a sales solicitation.     ​​

 

Energy:​

​Energy was sharply lower before Iran stated there is no deal. By the close, crude and diesel fuel were plus on the day with gasoline bringing up the rear.  I have zero confidence of any sort of peace agreement or accord between the US and Iran.  I anticipate the military actions to escalate, causing further disruptions in major oil producing countries, leading to higher energy prices.  No doubt, when or if this is resolved, knowing there is no shortage of oil, I do fully expect a crash of oil prices with hundreds of traders tasked with marketing as much product out into the future, at the highest price possible, as even with the discounts to the back months, could be the highest price achieved at expiration of the contract. I believe the price has been high enough, and situation volatile enough, that it would not surprise me to see a significant hedge purchase made by a major end user, only to have to be unwound if peace suddenly breaks out. I believe this current time frame to be one of immense risk of unintended consequences.    ​

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Bonds:

​Bonds are lower.  Inflation is soaring and the President wants lower interest rates to continue to fuel the fire. There remains no greater bull market than in equities and a bull market has to fed every day. The bulk of price action remains between 115'00 and 111'15 June bonds.  A break above or below will suggest a trend is forming.  It was believed that bonds were resuming their down trend, but for whatever reason, Wednesday's trade  pumped prices sharply higher.  Today though, it may prove to have been simply a pump and dump.  I anticipate bonds to move lower because core inflation is still elevated, the rate of inflation growing and commo

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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.

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