Shootin' the Bull about restructuring production and processing

“Shootin’ The Bull”

by Christopher B Swift

5/04/2026

Live Cattle:

At a historical high, and $9.00 higher than previous weeks trade, the cattle feeder still lost approximately $50.00 a head.  Backgrounders are urged to take note of this. There is not an input cost, outside of the steer, that can make a hill of beans worth of difference at this point.  The price being paid for some weight classes are equal to fats today with hundreds' of pounds to gain. So, the warning shot is believed to have been fired over the bow last week with some having extended themselves to points of no return. Large increases of open interest were noted, suggesting new longs own the top of the market and new shorts having marketed, if producers, at the top of the market. The next most probable move is expected to be futures traders creating a wide positive basis that will shift huge amounts of risk on to producers.  The past two weeks are believed to have been some of the more beneficial price structures for which to manage the risk all are assuming.  For the moment, with last weeks large increase of open interest, we can ascertain that the majority of new longs are  upside down, with new shorts believed having made headway towards managing risk.   As, or if, this price structure begins to erode, protecting the back end, where the discounts will be the worse, is where I recommend you focus.  

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​Feeder Cattle:

​It wasn't until Friday before open interest increased in the feeder market.  I remain unsure as to why new longs would be so aggressive in owning the top of the market, but for those new shorts, I am very glad they did.  The price structure could have been better, but I am unsure how with basis negative and new contract highs of futures.  Today, basis is positive again, anticipated to widen sharply, with expectations of a top in feeder cattle prices. Discounts to the back end are not that far out of line.  As well, even with the discount, and the new contract high made on Friday, this may well be the highest price achieved in the life of the contract month.  

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Is the Head & Shoulders pattern voided?  In some respects, yes. The new contract high produced a second top of very near to the previous.  Jokingly, it is possible that a "two headed monster" head and shoulders is taking place.  Note that few corrections took place on the way up from the mid-March low, suggesting the way down may produce few corrections.  Were a sharp drop off to the March lows be made, weeks could be spent trading within a huge price range to mark time for more cattle or further reduction of beef demand.  

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I don't know if Secretary Rollins speech today did anything to the markets, but I have to wonder how major grocery chains, food service, and restaurants would source their beef supplies from 25, 40, or 60 new plants it would take to make up the slaughter of the ones existing today?  How many more plants, or different owners, are needed to replace production capacity today?  The industry appears to be going through some painful restructuring of production and processing capacity at the top end of the known price range. 

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​​Corn:

​All ended higher today.  Above the fundamentals of weather not being perfect everywhere, there is seemingly a desire for commodity funds wanting to be long grains in the current inflationary environment.  In comparison to a lot of other commodities, grains and oilseeds seem a little under priced.  I anticipate all to continue higher.  Weather is the most important factor at the moment with expectations of dry areas remaining dry and moist areas remaining moist.  With more beans planted down south, and along the Mississippi, in drought conditions, and November beans breaching $12.00, I recommend you pay more attention to this.  Again, what a difference the narrative is between now and in January when having left the ADM conference not seeing any hope for higher grain prices.  Low and behold, an out of the blue military action against a major oil producing country, instantly increasing the need for biofuels, and corn is over $5.00 and beans $12.00.  Cattleman should take note of how quickly the narrative can change. ​

Energy:​

​Although both sides of unchanged have been seen, higher to sharply higher is what most of Monday's trading was.  I anticipate energy to continue higher as gasoline is at a new contract high today with both crude and diesel hot on its heels.  I continue to anticipate further military actions. 

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Bonds:

​Bonds are lower. Bonds have resumed their down trend with new lows from the mid-April high.  I anticipate bonds to continue lower as inflation has not gone down, the rate of inflation increasing, and commodity inflation a direct impact on the daily spending habit of the consumer. 

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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.

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