“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

​3/7/2025

Live Cattle:​

In my opinion, traders shook off the first 3 minutes of sharply lower trading at Monday's opening and never looked back.  The wide positive basis spread gave reason to try to converge it, and traders did just such.  A great change is believed to have taken place this week. That being, the basis is shifting from months of being positive, (cash leads the way), to now a negative basis, suggesting great expectations for future prices.  This to me is a fundamental change of the market. While not necessarily a foretelling price direction change, but one in which producers won't be hampered with marketing in the future at a discount. What I think it will do is provide false hope of cash trading back to these levels, for which they may or may not.  I think the fundamentals of the cattle market are as clear as ever.  There is woefully too much processing and production capacity for the amount of inventory available on the open market.  I believe great swaths of cattle have been consumed into vertically integrated supply chains, leaving fewer for the large production capacity available.  So, the lines in the sand appear very distinct.  That being, cattlemen believe cattle are going to go higher because there are fewer cattle, but beef demand, for which is and has been spurred by aggressive consumer spending, is slowing down.  It is not as noticeable due to the large cuts processors have made in an attempt to manipulate supplies in a manner that keeps prices elevated for their product. However, load counts and restaurant performance continues to show consumers slowing in discretionary spending habits.  This time frame is one of a fundamental change of the industry, with historical working capital at stake, and every sector having to manipulate production or processing in some manner to produce margin.  Whether it takes another $30.00 to $50.00 higher or $30.00 to $50.00 lower to accomplish the agenda of strengthening vertically integrated supply chains, you are in the midst of it right now.  A derivative can only assist in a function of production after the decision has been made to participate in production to begin with.  There is no need to hedge cattle you don't have or are not going to buy, you are simply a speculator.  So, recall that the line of production is that you assume risk (speculate) when you buy cattle, hedge when you no longer want to assume all the risk, yet become a speculator again if you offset hedges.  In more cases than not, that decision to become a speculator again comes with most likely a loss already attached to it.  Lastly, take a gander at a price chart.  The volatility and price expanse you are currently experiencing is exceptional, but not historic.  I stated this week that I believe traders are using shovels to dig and fill back in the tiger traps.  I have seen them use backhoes, and then trackhoes to dig those holes in the past. So, as difficult as meeting margins may be, and as unpleasant as it is seeing money go by you could have made, weigh the potential reward factor with the potential loss factor and then make your best decision based upon what you can't live with.   

Although cattle feeders saw no end to the higher price of incoming inventory, they did get a little help in some of their input costs.  Corn sold off $.70&1/4 via the July contract giving producers an opportunity to book some feed at a price not available since December of '24.  At the week's end though, traders pushed July back to $4.77&1/2, over $.25 off the low.  Recommendations have been made all week for cattle feeders to fix some feed costs into the summer.  Crude oil plummeted and diesel fuel not far behind.  From the high made 1/16, May diesel fell $.32 to its low and is about $.03 off the low.  As these were previous bottoms and believed support, I recommended topping off farm tanks or booking more spring fuel needs to average any higher price already paid.  Bonds continue to sell off from the sharp rally the past two weeks.  Although I am not a seller of bonds, one may want to consider adjusting any rates they can.  The stark contrast between the previous administration and current leads me to expect further radical changes in the political arena, world order arena, and most likely a great deal of having to live within one's means going forward. As cattle producers and consumers both benefited from the gracious giving of the previous administration, I have to believe the benefit will erode with the new administration's attempts to rein in spending. 

This is intended to be or is in the nature of a solicitation. An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of the margin deposits.  You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.