“Shootin’ The Bull”

End of Week Market Recap

by Christopher B. Swift

​5/6/2025

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Live Cattle:

Cattle feeders came to within 4 tics of having to pay $300.00 for the right to own feeder cattle in August.  On the flip side, backgrounders came to within 4 tics of marketing cattle in August at a price that has yet to be seen on the index.

The con of today's price structure of fat cattle futures is that, no contract month is anywhere near the current cash price with expectations of cash weakening as the Memorial Day weekend nears.  The pro of today's price structure is that all are at or near contract highs.  Suggesting that even though nowhere near the current cash, it is the best one can do at the moment.  This is an unfortunate time frame for which you can only do what you have to work with.  At the moment, futures traders appear reluctant to offer premium, or even a narrower basis.  I don't expect that to change.  Worse, the tiger trap already dug, has great potential to be dug even deeper.   

Feeder Cattle:

Futures traders bought the August contract up to $299.90 and looked around for a minute before running out of buyers. After a quick sell off, a few covered shorts and a few most likely bought the dip, but all in all, the $300.00 level has been tested and now we wait to see just how badly futures traders and cattle feeders want to own feeder cattle.  With the above statements on fats, any aspect of a lower cash cattle price, or hint of lower consumer demand through the holiday, would lead me to believe the next seasonal tendency will be as adverse as the spring tendency has been.  

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Unlike the fat market, whether you believe feeder cattle will continue to $400.00 or back to $200.00, the basis is exceptionally friendly in comparison to.  Option premiums remain between 2.5% to 4.5% of the value of the contract. Cattle to be marketed through the end of this year can be scotched at just below, at, or a few dollars above the current index.  This is such a friendly pricing scheme, in comparison to the fat market, just buying the at the money put would do wonders in scotching the now highest price of a futures contract and within $2.60 of the highest price achieved in the index.  

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I recommend you do everything within your prowess to achieve a minimum sale floor underneath every head of inventory you own, and continue to do so as more inventory is acquired. This is a sales solicitation.  

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Corn:

Grains look weak at the moment as they are visiting the bottom end of the range in corn and wheat.  Beans have begun to soften as well and I am surprised of the lack of movement they have had in comparison to the rhetoric with China.  Owning corn calls at the lower price is still recommended in the attempt to fix input costs while believed relatively low.   

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Energy:

Energy was sharply higher today, right after I made the comment of it looked like it was resuming a down trend yesterday.  The volatility alone is causing problems with producers.  High volatility keeps wholesaler's from lowering price on declines for fear of instant reversal.  Although energy may continue to trade lower, owning the call options to help fix input costs is recommended.  By the time, or if, the market were to reverse higher, you would then be on the flip side trying to buy more expensive inputs. Own the option to take control of what you will need going forward.  Recall that there is no commodity inflation except for beef.  Gold is a nonperishable commodity and is an actual reflection of inflation, not the cause of.  So, with no commodity inflation, and perceived extensive goods and services inflation, it is possible that commodities could move higher for either safe haven factor, or simply that production is being skewed by any number of factors.   

Bonds:

Bonds were plus on the day, but not by much. The FOMC meeting adjourns on Wednesday with no expectation of anything.  The inflation is not commodity, so no further declines of anything, but maybe beef, would be expected to have an impact on consumer discretionary spending.  It is the goods and services that are inflated and expected to remain so.  Therefore, I doubt the Fed will lower rates anytime soon.  I anticipate the bonds to resume their down trend, along with the US dollar.  ​

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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.