Shootin' the Bull about odd trading

“Shootin’ The Bull”

by Christopher B Swift

5/20/2026

Live Cattle:

If I thought Tuesday was odd, what am I thinking today?  I am in awe of the dynamic price movement, both higher and lower reflecting how discombobbled the market has become. At the close, it appears that fundamentals are at play.  Those being, there are going to be more numbers of heavier cattle this fall and early winter due to drought.  Estimated higher placements in April is believed the first month of an unknown of, how many more to come. Packers are believed going to continue to pull every string, and hobble every variable cost, to help mitigate the losses.  However, it's questionable as to what can be done.   

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Nonetheless, futures traders went to work on increasing the risks being assumed by cattle feeders with feeder cattle futures higher, after a dramatic sell off and fat cattle lower on the day.  Cash is questionable this week with an abbreviated slaughter week for next.  Cattle feeders are believed being placed, or placing themselves, into a wider negative profit margin, for which already appears very wide and difficult to narrow without a continually higher price for fats.  

​​​​Feeder Cattle:

The $5.00 to $8.00 ranges are normal now.  This should help to curtail any reservations you may have had when paying the premium for options.  The $366.00, at the money August put, is trading around $12.80 at the close. Today's range was $7.35.  I recommend you consider that for just a little over a days range of trading, one could spend a tad more and own the at the money August put that may or may not produce any profit and you may lose 100% of the premium, but regardless, you will have fixed a minimum sale floor going into the largest volume of sales for the year.  If going to use the August contract to help mitigate the risk between now and your summer sale, do not sell a call against it, simply due to potential convergence of basis and you will not have time to allow for full convergence of basis if having sold in June or July.  It may just be you have to spend a little more to protect the enormous gains that have been made.  If marketing closer to the expiration of a futures contract, then consider selling a call at a strike level you can live with the hindsight above. 

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As difficult as this is to discuss, I think it needs to be.  If drought pushes more inventory into feed yards, the total number of animals didn't change, only their location. Some view this as further shortage of inventory.  It is, but primarily to backgrounders and not inventory that has died. So, if more cattle are moved into yards, leaving fewer cattle to utilize pasture/backgrounding capacity, the next round of rationing is expected to be the loss of some of that production capacity.  As the summer video sales are coming quickly, I think it worth watching to see if more inventory has to be moved than what would be considered normal. If so, and the drought continues, the bidding may be sparse for no more reason than no more water or pasture. I have no reservations in the anticipation of even wider daily price fluctuation, exploring the ranges more times in a session, with expectations of a significant price move out of this range, whether higher or lower.  

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For the moment, I'm in anticipation of a move down to the March low per respective contract month, followed by a sideways trade to mark time through the video sales.  The Moore Research seasonal tendency for a lower trade ends this week.  Were the on feed report to produce a negative price fluctuation, it could push lower into the first of June.  The seasonal tendency then runs higher into the end of July.  Drought would be a factor that could cause a counter seasonal trade.  

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​​​​Corn:

All were soft at the close. December corn has a distinctive 5 wave pattern from 4/14 to 5/4 on the daily close only chart.  This top was followed by a 3 wave move down to the 5/15 low.  From there, corn moved higher and now lower today.  A close of December corn under $4.81&1/4, or trade under $4.80 will begin to reverse what appears to be a fledgling bull market. Wheat and beans remain in a bull market with expectations of higher prices.  Rains may help the Delta, but not yet.  I don't think there is any hope for an increase in US wheat this crop year, so world wheat crops may have as much impact on US wheat prices as US wheat does. China, India and Russia are the largest wheat producing countries to watch. ​

Energy:​

​Talk about volatility, price expanse, and the President's tweets, there is nothing in history to compare what chain of events can be set off with a comment that may or may not have any weight to its validity by one human being.  Nonetheless, on today's tweet, it moved crude oil down $2.98 in one minute, followed by another $1.15 in the next.  This is just two of the many minutes for which crude would trade a dollar plus, higher or lower in one minute. For the moment, I continue to anticipate a higher price for energy.  The DOE stocks report showed a large draw in crude oil, but due to the President's tweet, it had no impact on the price. 

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Bonds:

Bonds soared today, but not before making a new contract low in the overnight.  The only reason bonds soared is believed due to lack of selling by China and Japan of US debt.  They have been noted sellers of US debt recently.  I think this may be a dead cat bounce, simply due to core and commodity inflation roaring.  With no cuts in government spending, there is not anticipated to be in reduction of inflation. 

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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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