“Shootin’ The Bull”

by Christopher B. Swift

​5/16/2025

​​​​

Live Cattle:

In my opinion, what a week of disseminating information for which will most likely take the weekend to decipher. As serious as I know the screwworm is, I have reservations about this being the reason to close the border, again.  While the imports are approximately 3% of annual slaughter, and important to some US producers, it kills 100% of beef exports from Mexico, therefore punishing them greatly.  The great need for cattle and high price of beef to the consumer would seem as if the Trump administration would be working towards helping to eradicate on both sides of the border, not just ours, and not by just shutting the border.  Again, I have reservations and love a good conspiracy theory.  As best I can recall, a fly can fly and knows no border.   Greed and fear appear to have been the two biggest market movers this week.  Regardless of which side you are on, this week's price fluctuation gave everyone a shot at doing something. Cattle feeders continue to hold the key.  With a poor basis to work with to begin the week, it only grew worse by weeks end.  The influence this has on cattle feeders' willingness to bid historic prices for newly acquired inventory is expected to be mulled over greatly this weekend.  Although supplies are not expected to increase, demand is believed finding stiff resistance as the reduction of slaughter pace has driven boxes to trading above $350.00 now.  Beef movement over the holiday weekend will help to gauge if price is influencing consumers' decisions. More signs of vertical integration have been seen this week with the desire to merge Marfrig with BRF, two competing firms that go head-to-head with JBS.  As consolidation is a form of vertical integration, these events continue to help support my analysis of the current agenda.

Basis is worsening in the fats and shifting quickly in the feeder cattle market.  More risk will be assumed by producers than can be managed with futures or options due to the discount of futures.  Increases in working capital have yet to subside.  Rationing of cattle and beef have been ongoing since the Biden administration poured out the 6 trillion dollars.  I think this was sustained all the way to the March of '25 low when the price kicked into high gear, now rationing producers.  With too much production and processing capacity available, and 2 to 3 years before expansion would produce volume to work with, surviving is believed the next step.  There are few recommendations to offer with benefits due to the basis being so skewed.  The feeder cattle futures are still near even in basis, but have swapped from negative to positive in quick fashion.  Although $10.00 lower in futures, the cash index levels have stalled so far well under the high in futures. The relentlessness of margin calls, and clarity of hindsight, made it difficult advising clients that this is the more beneficial marketing environment than if attempting to achieve marketings or hedges when prices move lower.  With prices sharply lower at weeks end, and massive swaps and widening of basis, one can see that marketing on the way up can have great benefits over the increase risk of basis spreads when prices decline.  

Soybeans have my undivided attention due to the lower planted acres, potential trade negotiations with China, and Thursday's sell off due to EPA bio-fuels mandates not being what was expected.  Recommendations were made on Thursday and Friday.  Corn is weak.  Simply due to price, fixing input costs of feed, to feed historically priced cattle, with call options, is a way to mitigate potential adverse price fluctuations on variable input costs. Energy ended the week higher as well.  I believe energy has reversed and will trade higher.  Recommendations to top off farm tanks, book some fuel into the future, or buy call options in the October and December contract months were made to again help mitigate the potential risk of adverse price fluctuation of a needed input commodity.  Bonds finally seem to have found some support.  The hate selling of US debt appears to be subsiding as the US gains strength in its most recent negotiations with other countries.  With trade very much desired with China, repurchasing US debt, as well as maybe some soybean business would go a long way to help US producers. Data this week showed inflation subsiding by a tenth of a percent again, but nearing the 2% level desired.  Trump wants lower rates to continue the economy moving, creating jobs and bringing more businesses back to the US.  The Fed is cautious, but with rates at current levels, they could subside slightly and be of great benefit to all. 

“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.

​