Shootin' the Bull about widening starting margins again

“Shootin’ The Bull”

by Christopher B Swift

3/27/2026

Live Cattle:

In my opinion, cattlemen began widening negative margin spreads again this week.  Feeder cattle prices rose more than $10.00 over their fat cattle counterpart to start the feeding process.  I would believe as well, from prices paid through the week, that the spread between lighter inventory and heavier widened further as well.  So, not much appears to have changed to the cattlemen from their perspective.  Dealing with this shortage has proven to what lengths some will go.  Which leads to the next item of, how to keep the immense amount of working capital from being impacted while current events are tending to cause significant shifting in consumer buying and business inputs? With this week's beneficial narrowing of basis spreads, rolling up lower strike put options and continue to protect newly acquired inventory is recommended.  Hedging has become a very displeasing aspect to cattle production.  Profits locked in or losses muted are not producing the full extent of profitability that cattlemen want or can see in hindsight.  This leads me to believe that there is immense exposure to downside potential.  

Headwinds for the economy strengthened this week, with not only higher energy prices, but now the equities market at a new low from historical high and new contract lows in most debt instruments.  This bout of inflation came on very quickly and to a large extent, caused by the increase in energy prices.  This is not from wage or employment increases. So, as it came on quickly, it could dissipate as quickly, but for the moment, the issue continues to evolve.  All combined, it simply appears as if excessive risk is being taken by producers in a time frame that may or may not be supportive to the beef/cattle industry.  What I am the most unassured of is whether cattle prices excel in price, were the current events to be resolved, or do they move sharply lower, with everything else, if resolved.  The President continually tells us how quickly, and how much, prices will drop when this conflict is over with.  The problem is, there will be little advance notice.   It's tough to say cattle will be resilient under all circumstances, but so far, they have.  

Corn has my undivided attention for the moment. One of the older chart patterns of significance was of consolidation.  Prices would remain in a defined price channel for months or years.  This represented equilibrium of supply and demand of the commodity. A break out from was considered an upset in the equilibrium and prices would rise or fall until restored.  December of '26 corn has a pattern that fits the narrative of an equilibrium in the supply and demand factors that have recently been broken to the upside.  Prices broke above the near two yearlong sideways trend channel and have sense consolidated above.  This leads me to anticipate the next most probable move to be higher.  I recommended this week for farmers to consider owning December calls to repurchase presold bushels.  I recommended for cattle feeders to own the December '26, and or May/July '27 call options to protect against further upside movement. Input costs have been exaggerated and previous recommendations to top off farm tanks and book some spring fuel for planting have been exaggerated such, that I did not have this kind of expectation when making those recommendations.  I don't for the corn either, but under the circumstances of current events, and great expectations of unintended consequences, booking rising input costs could be helpful as planting is beginning.  Diesel fuel continues to lead the way with nearly a new contract high close today.  May diesel is only $.21 from the spike high made last Sunday night.  With daily ranges exceeding $.20 recently, it appears only a day's trade away. Volatility and expanse of price range, of multiple markets, is creating excessive risk for all those who participate and produce in a commodity market. 

“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.

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