“Shootin’ The Bull”
End of Day Market Recap
by Christopher Swift
2/5/2025
Live Cattle:
There is little to add today. By the end of next week, I recommend you have plans to market inventory. Basis is horrible towards marketing cattle in the future. Not only that, the highest priced feeder cattle in January won't be slaughtered until June and July, where discounts are now severe. Signs of the rising feeder cattle market are believed becoming apparent. From one week to the next, fed cattle dropped approximately $20.00 per head in profit margin with cash price the same both weeks. Why the difference? Just about every week, feeder cattle have been higher and we are finishing the ones placed in September and October, the lower priced time frames of the index. If cash fats don't move, cattle feeders will consistently see lower returns, simply due to having paid the higher price for incoming inventory. When will this stop? Approximately 150 days from now is when highest priced feeder should slaughter. Top index price reading is $281.68 with some slightly lighter weights that will top that by dollars. Reliance on consumer demand is critical. Fourth quarter shifts of inventory, diverted from going on feed to wheat pastures, or held below the southern US border, will return over the next 8 weeks. Cattle feeders are expected to see more inventory to chose from and it will be more than interesting to see if those who paid top price earlier, will pay even higher in the future.
Feeder Cattle:
A slight reprieve in the selling today. Between now and the end of next week, you will be expected to have a price risk management plan to follow. The heat of battle is no time to be calculating what is needed and what time frame. As well, when in the heat of battle, you tend to respond to the moment, instead of to the goal. I do not know what the market will afford me until then, so think about a couple of things. Were futures to move to levels for which when initiating a fence options spread, the short call strike price is at or above the current index reading. At the very least, you would then be marketing cattle at the known high so far. As well, if this opportunity present's itself, the futures may not converge any more than at present. I think it possible between now and next Friday that cash softens and futures mark time in a sideways manner. If prices then begin to reflect the seasonal tendency, both may fall with the Hare and the Tortoise routine starting again. That is what I thought last fall, prior to the rain event and closing of southern border. Now that cattle will be coming from the south and off wheat pasture, I think this scenario should be brought back to light.
Class III Milk:
Milk was mostly higher today. I expect milk to continue to trade higher as the dairy industry appears to be hitting on all 8 at the moment. With elevated milk prices, and dropping black gold calf nuggets from old Holsteins, there is little reason to change anything.
Corn:
Corn and beans were soft. Rain in Argentina most likely softened the bulls stance a little. I continue to expect corn and beans to trade higher.
Energy:
Energy is lower today. A close this week below $71.29 will begin to overlap previous waves. I do have a reason to hope for a stronger energy market. I believe that were energy to begin to trade lower, it would reflect a weakening economy or worse reflect signals of recession. As inflation has remained entrenched, and commodity prices no lower on much of anything, a lower spending habit may be on the horizon. You have to know that is exactly what this administration is attempting to do. Therefore, consider whether cattle/beef will appreciate if inflation subsides, or will follow the path of deflation with other markets.
Bonds:
World tensions remain high and there is a great deal of saber rattling going on. Gold continues to make new historical highs and even bonds picked up a little today. As there appears no break in inflation, bonds are believed in a slight "flight to quality" mode. Of the one and only thing I have been accurate on is that volatility is high and is expected to remain that way for quite some time.
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.
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