“Shootin’ The Bull”

by Christopher B Swift

​8/21/2025

Live Cattle:

Not much took place out of the ordinary today.  Friday's on feed report may well see the first break under 11 million head on feed after a couple of years above.  Basis has firmed considerably.  Although nothing like the advantage backgrounders have in their ability to manage risk with premium into the future, the narrowing will help considerably.  As retail beef prices continue to climb, and grocers looking at the last summer holiday of the year, I think it very possible that more antic's are pulled by packers next week as everything that could go on to a shelf or menu by next weekend is already in route. 

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Option premiums are not inflated.  The observation of the rise in premium is due to the rise in the value of the contract.  Most premiums are in line with theoretical value and continue to run between 3% to 5% depending upon time.  Frustrations grow with the higher price for those hedged and a belief that this will cause producers to forego, or minimalize risk.  

Feeder Cattle:

Backgrounders are believed, or should be, enjoying the premiums available to market into.  As above, the option premiums are not inflated.  They have risen in relation to the increase in value of the contract.  Although the dollar amount seems large when quoting, a quick tap on the calculator continues to have option premiums trading between 3% to 6%, depending upon time.  As angle of ascent continues to steepen, moving the scotch up is anticipated to be of benefit were prices to soften, or worse, decline sharply.  As every recommendation to date has fallen short of a top, consider that you still have the ability to market at the top, or higher if using futures. 

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I still believe this market has some commonalities to the housing market crash in 2008.  Some are having to borrow more money on cattle already owned, and the higher price, creating significant profits to some, are being reinvested at the higher price levels.  Unlike the housing market, producers have every opportunity afforded them to protect downside risk.  Whether higher still to go or not, cattle feeders and feed yards are believed divided with a disproportionate advantage to the north due to restricted inventory and premium of fats in the south.  

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​Corn:

All were firmer today with corn at new highs from contract lows and beans having broken out of a multi-day sideways trade to the upside.  ProFarmer tour is believed coming in at just under USDA numbers.  As well, the SRE's will be addressed as the President is expected to begin digging through the backlog of EPA biofuel mandates.  While not critical by any means, but paying tip top dollar for incoming inventory without price assurance of product, leaves cattle feeders susceptible to factors other than supply.    ​

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November '26 beans broke out to the upside.  I recommend buying November '26 soybeans with a sell stop to exit only at $10.43.  This is a sales solicitation.  

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Energy:​

Energy was higher today.  Although still well entrenched in a sideways range, higher is not the direction I have been anticipating, or is it in a direction that would suggest a softening of the inflationary factors.  This may just be a larger correction of the initial down move that may push October crude another dollar higher before potentially resuming a fledgling down trend.  

Bonds:

Bonds were lower. Although still well entrenched in a sideways range, higher is not the direction I have been anticipating, or is it in a direction that would suggest a softening of the inflationary factors. A lower trade of bonds suggests a greater threat of inflation than deflation.  For the moment, it appears both markets are searching for a trend.    ​​

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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.