Shootin' the Bull about eroding consumer confidence.

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

​2/25/2025

Live Cattle:​

Eroding consumer confidence could not erode the optimism of cattle feeders.  Even with packers cutting slaughter pace to prop up box prices and other markets reacting to the seemingly weakening tone of the economy, cattle feeders continue to pay top price for incoming inventory.  Even if cattle feeders bought the positive basis of feeder cattle futures, the sharp rally in feeders and exceptionally small in fats, just keeps cattle feeders going backwards at the moment.  Until new contract highs are made, I am going to stick with the wave count suggesting this rally as a wave B or 2 with the next most probable move a 3 or C wave to the downside.   

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​​Feeder Cattle:​

​Positive basis spreads were most likely too wide for some to want to make sales.  With the past 2 days and $6.00, it has helped tremendously to allow backgrounders the opportunity to lay off risk at a much narrower basis and higher price than last week.  Futures traders are believed simply buying the positive basis or covering shorts.  Backgrounders continue to enjoy the appetite of cattle feeders.  As long as they do, keep marketing them and when the appetite fades, have the hedges on to continue to benefit from the higher prices out into the future. Consequences are elevated at this point.  Optimistic cattlemen are face to face with economic numbers and outside market movement that suggests consumers are contracting in spending. This is creating great expectations for both sides.  Living with the potential consequences is easier when you know what to expect.  With each derivatives performance known, then it becomes as simple as what consequence you can live with.  I think the worse consequence is doing nothing. ​

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​​Class III Milk:

​Milk was lower today.  It continues to trade at the lower end of a sideways range.  February goes off the board this week at above $20.00.  I expect the discount of each month to move up to above $20.00.  

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Corn:  

​Corn and wheat were soft with beans mixed.  I want to own corn calls in the July and December contract months with a trade down to $4.75 July and $4.55 December.  I will be watching for those levels. I am negative beans and wheat.  ​​

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​​Energy:​​​​​​

Energy plummeted today.  Consumer confidence is sharply lower and since there has been no production increases in energy, it leads me to anticipate a decline in demand.  Watching the spread between diesel fuel and gasoline is believed a good indicator as manufacturing and industrial production continues at an elevated level, with diesel the fuel source for and gasoline, the fuel source of the consumer seen weaker.  I believe that the high produced by untethered government spending is fading very quickly with expectation of a huge consumer hangover. ​

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Bonds:​​

​Bonds are higher as the inflation has begun to impact the consumer.  It may take a lot more than just a few days higher in bonds to get the consumer back to spending at previous levels.  The now narrowing margin between the Fed window and banks will be expected to reduce profit margins to banks that have been incredibly wide over the past 4 months. Price action in just about every market today reflected traders selling.  ​​​​​

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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.