"Shootin' the Bull" about if they build them, will they come?

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

​2/3/2025

Live Cattle:​

Expectations appear to be shifting.  Where as a $2.00 break lower would have been pounced on, but seemingly not today.  The industry continues with too much processing capabilities and that was brought to the forefront in a article Craig Purvines placed on his website, "The Cattle Range"  

Four new beef processing plants, with combined capacity to process nearly 9,000 head daily, are scheduled to open in 2025 & 2026.

America's Heartland Packing - Warren County, MO: This 775,000 sq. ft. plant, with the capacity to process 2,400 head daily, is expected to open in early 2025.

Sustainable Beef - North Platte NE: This plant is being built with support from Walmart and could be processing cattle in 2025. It's expected to process 1,500 head of cattle per day at full capacity.

Producer Owned Beef - Amarillo TX: This $670 million plant is being built by a group of cattle feeders near Amarillo, Texas. It's expected to process at least 3,000 head of cattle per day and open in 2026.

Cattlemen's Heritage Beef - Mills County Iowa: This $450 million plant is being planned south of Council Bluffs, Iowa. It's expected to process up to 2,000 head of cattle per day. Construction is scheduled to begin in 2025.

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With few changes in on feed capacity over the past 20 years, some major contraction in production, or intensive production is going to have to be seen. Neither is expected anytime soon.  So, that leaves the wide basis spreads to contend with, as well as not enough cattle to fill all the slots.  The wide basis spread will be filled with great expectations of both sides.  Bulls will be expecting futures to move sharply higher to meet cash, while bears may sit patiently to see if cash begins to erode.

Of one thing for sure, this weeks opening of the Mexican border to cattle, and today's offset of tariff's for 30 days, suggests there is a window for which many are expected to bring as much inventory across as is humanly possible.  Couple this with not nearly as low of a cattle herd as was expected, leading me to expect significant volatility.  

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​Feeder Cattle:​

​Cattle feeders were prompted today to buy the at the money call and sell the $10.00 out of the money put.  This is a sales solicitation.  This is recommended in an attempt to buy incoming inventory cheaper than at today's price.  There wasn't too much excitement for this trade.  Backgrounders are back in the same tiger trap as a couple of weeks ago.  At this juncture, there will be significant convergence and divergence of basis as the supply issue is changing rapidly with today's events, and known wheat pasture coming in March and early May.  The inventory report did show another decline, but not by as much as many thought.  Increased beef production per head will help, and no doubts, more imports.  Cattlemen are expected to continue to fight over remaining inventory with excessive working capital placed at risk.  Today remains the highest price to market inventory into, while the back end remains the best place to buy inventory.  

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​​Class III Milk:

 Milk is caught up in the volatility as well.  I expect milk prices to continue higher.  Creameries and Cheese producers are welcome to contact us for analysis on milk futures. 

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Corn:  

​Corn and beans were going up before the tariff issue.  As well, it was know last Friday during market hours.  So, the lower trading this morning may have been do somewhat to the tariff's, but once removed, both resumed their up trend.  I expect corn and beans to continue to trade higher.  

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​​Energy:​​​​​​

​Energy leapt from the gate on Sunday's opening.  It spent most of the day trading lower, but only crude actually traded down on the day. Both products held their gains with crude perking up at the close to be up on the day.  I expect energy to continue higher.  ​

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Bonds:​​

​Bonds held their gains for the day, but I'm not sure this is any start to a bull market.  Inflation continues and tariff's will increase the price of certain items if they continue.  Breaking the consumer's spending habit, that would reduce inflation, is not going to be for the faint of heart.  ​​

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​​This is intended to be or is in the nature of a solicitation. An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of the margin deposits.  You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.