Shootin' the Bull about undercutting both producers and processors

“Shootin’ The Bull”

by Christopher B Swift

5/11/2026

Live Cattle:

It was anticipated for there to be a reduction in processing or production capacity sooner, than later. Either would have helped to curtail the continual bidding higher to make sure inventory wound up at your place and not your competitor.  Unfortunately, this step by the President undercuts both production and processing, at the same time.  Although it will be a chain of events, and most likely not the answer to the problem, but simply a recognition that when something goes one way for too long, someone else wants to participate.  The board structure is believed telling us the rest of the story.  The front end won't be as impacted, simply due to time it takes to import more, process, and distribute.  The back end though, with steep discounts, stayed lower as the turn of events will be the restaurant, grocer, or food service sourcing more product from outside the US. The amounts imported will help determine the impact on US beef and cattle.  

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This event is not believed to have come out of the blue.  Thursday and Friday's large price range, lower trading, and volatility of futures, didn't quite match with the stronger cash market movement.  Hence, low and behold, it appears some may have already known of this forthcoming action.  As well, this has been discussed recently, so not a surprise to you.  This change of events will lead me to anticipate a wider basis to develop in the back months.  I recommend you get busy tonight and calculate all that you have on feed, what your marketing plan will be, and do not tarry in action, as this event is believed a fundamental shift that will influence cattle and beef production. Mostly, this will impact what someone is willing to pay for the projected return. 

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​Feeder Cattle:

​Backgrounders continued last week with widening projected margins against themselves.  Futures traders are anticipated to widen the back month basis spreads to widths that will be of a great disadvantage when attempting to manage risk. In my opinion, the current events today will have longer term ramifications for which are already being discounted.  What was available to you in the past is no longer, and questionable as to if will return.  With the believed shift in fundamentals, I recommend you become more aggressive in managing the risk you have assumed.  The unfortunate of wide price ranges will most likely spook some from doing what needs to be done.  In this case, I recommend owning the at the money put option and see where prices will be when your marketing time frame comes.  To others, the basis spread is of less concern due to the ability to use options spreads that will offer predetermined marketing levels, that may or may not help to reduce the basis spreads already wide.  Note that if you need to fix some pricing, here is an example of such: 

Buy the in the money October $358.00 put at $16.97 and sell the October $380.00 call at $7.12 for a premium of $9.85.  Now you have a minimum sale floor at $348.15 or $7.12 higher than if just bought the put, and a maximum sale ceiling of $370.15 or $8.94 from the all time high ever reached by the index to date.  This is a fully marginable position with unlimited profits and losses above and below the strike prices.  This is an example of a sales solicitation. 

Regardless of which derivative you use, or don't use any at all, the supply situation of this bull market is so well known, that some have become emboldened and opened cans of worms that may not be easily shut, and others are attempting to cash in on your market.  The rationing has brought upon the increase of the beef/dairy cross, consolidation of multiple entities, and now, has influenced other countries to a point in which they want to participate.     

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​​​​Corn:

All were higher.  Beans were firm, but still unable to close above $12.00 in the November contract.  This weeks WASDE report and meeting with China is expected to help the bean market.  Bean oil is believed going to show the most demand.  Corn was higher and eyeing the 5 handle again.  Wheat was the strongest, having reversed last weeks correction and closing on the high of the day.  I believe the rally in grains and oilseeds is resuming. Cattle feeders were dealt a pretty heavy blow today by being undercut in their product.  Whether that changes the fundamentals or not is yet to be seen, but while that is working itself out, outside of the cattle input costs are not going down.  I recommend you consider what price you do not want to pay for corn and buy call options at that strike price.  ​​​

Energy:​

​Energy is believed resuming its up trend to.  Huge price ranges and high volatility are not for the weak at heart in this market.  Regardless of the volatility, the situation that is causing such appears a long way from resolve and is expected to escalate before improves. 

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Bonds:

​Bonds are lower, but they appear to be methodical in going down, as to not cause a panic. Bonds are believed in a down trend, for good reason, with expectations of follow through to the downside. If interest rates are another part of input costs, anticipate a rise in such. ​

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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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