“Shootin’ The Bull”

by Christopher B Swift

​7/25/2025

Live Cattle:

In my opinion, the competition heated up considerably this week with both cash and most futures in feeder cattle making new historical highs.  The competition is believed what could be the most interesting aspect of this rally.  That being, I have an opinion that there are about the same number of animals most think there are, but fewer available to the open market.  Vertical integration is believed to have strengthened, producing more captive supply, making for less inventory to market to everyone else.  This is difficult to prove, but when viewing the spreads between starting feeder and finished fat, it suggests that money invested at the moment is for a long-term agenda and not necessarily just the next load of cattle to feed.  If any truth to this could be proven, it may begin to dissuade some from competing with those attempting to strengthen supply chains.  As the spread between starting feeder and finished fat widened further on Friday, to another historical width between the two, it leads me to believe there is significant financial backing behind some, with some reinvesting current profits into even more expensive feeder cattle with only one aspect to be profitable from, an ever increasing price for fat cattle.  This is likened to "let it ride" when at the craps table. Whether cattle prices move higher or lower from this point forward, it appears that vertical integration is playing a significant role in price movement.  As it took nearly $10.00 cwt to form vertically integrated supply chains in hogs, we are at the polar opposite in what it may take to form a stronger supply chain in cattle.  Seemingly even those hedged will continue to do better with a higher price.  So, all that has to take place is cattle prices continue to move higher, regardless of consumer demand or beef prices. Of one enormous benefactor to cattle feeders is that for the next 4 contract months after August can all be traded within a dollar of one another and at contract highs, regardless of positive basis.  As the subject of $8.00 and $9.00 corn was brought up again this week, making comparisons to cattle at these price levels, one may want to look at what futures prices were in comparison to at the time.  In May of '22, December '22 corn was $7.66&1/4, Dec of '23 at the same time was $6.79, Dec of '24 $5.97 and Dec of '25 $5.80.  At Friday's close, December '25 corn is $4.19 with the contract high $5.80 made in April of '22.  Long way around the barn to say that were placements to be a tiny bit heavier this fall, due to anything, especially a reopening of the southern border, it may prove that this current time frame was the highest price available to you at expiration of the April '26 fat cattle contract.  Again, all that has to happen is prices to continue to move higher and all should be okay.  

Futures traders have remained status quo this week with keeping basis positive in fat cattle and mixed favorably in the feeders.  A few feeder months are premium, some dead even, and next year's contract months at a fairly hefty discount. Backgrounders, and all sectors under, have benefited greatly from the opportunity to market at today's price into the future.  As above, as long as the price continues higher, producers would be anticipated to be in good shape.  A lower, or sharply lower trade, or worse, a grey or black swan to fly over, would quickly expose those who chose to assume the risks themselves. The clarity of hindsight is expected to play a large role in this as well.  All recommendations to be hedged have fallen short, simply due to Friday's new contract highs.  This, along with the exceptionally bullish outlook of no more cattle, even after 33 months in a row of over 11 million head, is expected to keep some from spending any more money on hedges.  The unfortunate, or fortunate, whichever way you look at it, is that vertical integration is being sought, and is expected to continue to produce significant volatility and price expanse, in both directions, until specific percentages of market share are obtained. 

Feed costs are expected to soften further going into the fall with still perceived as an over 15-billion-bushel crop year.  Whatever issues with tassel wrap, drought, flood, or anything else is believed minor in comparison the whole of the crop and additional acres planted.  Not so in beans though. They are short of acres over last year with a very hot next three weeks forecasted during blooming for a larger portion of the crop.  I continue to anticipate November of '26 soybeans to move higher.  Of the outside markets, energy has my undivided attention.  I have been friendly energy for quite a while and it has been a volatile roller coaster ride.  Recently though, after the large one-day collapse, consolidation has taken place and created a triangular pattern in crude oil.  I think this is crucial to watch as were it to trade lower, I would anticipate a weaker economy with potential signals of recession.  The flip side is that were prices to move higher, inflation would be rearing its head again and coming from dormancy of stagflation.  Bonds have gone dormant as well and begun trading sideways.  This market may help to decipher an economic move as were crude to move lower and bonds higher, recession would be more so in the thought process than inflation.  The flip of that is that were crude to trade higher, and bonds lower, the next bout of inflation may be at our heels.  Especially with our weak US dollar and tariffs on just about everything imported. Lastly, I've seen the on feed and inventory reports.  With the lower placements, it may begin to suggest expansion has begun. The inventory report appears about 1% better than expected with the on-feed number slightly under the trade guess, but the lower placements maybe an issue.  As most of those cattle placed in June won't slaughter until November or December, both of those time frames are not noted as big beef eating time frames, barring the Christmas party rib roasts.  

​