Shootin' the Bull about transitioning

“Shootin’ The Bull”TM

by Christopher B Swift

7/31/2026

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Live Cattle:​

In my opinion, information from the semi-annual cattle inventory report has caught my attention.  Two analysts this week were able to piece together some numbers from the report that suggested expansion has already begun.  Even at a snail's pace, it is expected to pick up. A significant issue has been noted for a year now that if or when expansion does take place, it will pull a lot of heifers out of slaughter and make for really low placements.  So far, if expansion has begun, that hasn't been noticed yet.  As well, with the opening of the Mexican border, some percentage of heifers held for breeding would be replaced by a Mexican steer/heifer. What appears to be taking place is the transition from the bull market to maybe a bear market. 

Here is a quick take on the cycle top, compared to 2014. Via the weekly feeder cattle index, prices topped in December of 2014. At that time, it was anticipated there was going to be an exponential birth rate due to not only holding back heifers, but holding back Bessie to have another calf, whether she died during birth or not. At that time, the calf was worth $800.00, Bessie $300.00, leaving a $500.00 profit margin if Bessie died.  The initial break lower was $37.10, unfolded in 3 waves, and then rallied $22.46, because the cattle still weren't there.  That rally took approximately 3&1/2 months.  By then, the cattle had started to come from the earliest bred and continued for the next 5 years.  The decline after the short rally was $109.52 in approximately 16 months.  Today, we have recognition of congestion at the center of the plate, an increase of imported beef, increase of domestic beef production, an efficient breeding platform from beef/dairy cross, stabilizing consumer demand, and now more cattle to work with.  These are factors that are causing the transition, but none are to the point yet of having caused a dramatic impact yet. The "yet" is what to prepare for. 

While futures traders are willing to narrow basis, and still some bulls left to bid cash higher, use this time frame to prepare for what may come.  Exceptionally wide price ranges and the volatility to go with it, has made predicting the next most probable move more than difficult.  Hence, I continue to recommend using options to manage the potential for further adverse price fluctuation.  If you don't understand options, you need to.  If you do understand them, you need to use them.  While my timing will be off considerably, I believe my analysis of the situation as a whole is strong enough to warrant action, instead of hoping for the best.  From August of '25, more cattle have traded above $358.00 than below.  Even with the most recent break lower, some calf and stocker prices have been historical, or just under.  With a large percentage of cattle bought over the video sales will be heavy feeder cattle by the first of the year, the January contract is believed significant towards hedging these cattle.  As well, regardless of what the percentage of Mexican inventory to cross the border will be, I would anticipate the trade to be very fluid by the end of this year. 

July '27 Corn has sold off $.27 from the recent top.  I anticipate corn to find a bottom soon and I am sure I will be woefully off on my timing.  However, this break lower in corn is recommended to be used to fix feed costs with long call options at levels you no longer wish to pay, in the time frame needed for delivery.  Diesel fuel continues to trade at contract highs and off this spring's high by just $.60.  I anticipate diesel fuel to trade higher due to insufficient refining capacity and the extensive demand created by the military actions and soon to be harvested 180 million acres of corn and beans.  Bonds and notes were lower as inflation continues to linger, with the rate of inflation higher than desired. With the Fed having kept the discount rate unchanged, banks will have a slightly wider margin to work with, but anyone borrowing will pay the price for. Government spending is the problem and that is not expected to subside anytime soon.    

“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.