Shootin' the Bull about negative margins

“Shootin’ The Bull”

by Christopher B Swift

​12/16/2025

Live Cattle:

Exposing the procurement of inventory to place on feed, in a projected negative margin, is not believed a foretelling event for a higher or lower price.  It simply reflects the forward price movement that has to take place in order to return input costs. As well, it suggests that if no higher or lower price were to materialize, the loss would be as projected at the start.  The unfortunate is that any decline of fat cattle prices would only go to exaggerate an already losing position.  Nonetheless, cattle feeders continued to inhale negative margins. I do not disagree with there not going to be any more cattle, at least until the border is reopened, but that is one side of the supply/demand equation and there isn't much to argue about on the supply side.  Therefore, with a great deal of focus on the demand side, specifically for beef, and price action of other markets pointing towards recession, I think the spreads between starting feeder and finished fat, need to have an at the money put option on every head placed. This is a sales solicitation.  

Feeder Cattle:

Futures traders continue to keep their distance from the index.  Backgrounders are believed appreciating greatly by the aggressiveness of year end buying.  Going forward though, it appears backgrounders are entering into a like production scheme as cattle feeders, but maybe with some additional leeway due to weight variations and length of time in production.  My opinion alone is that cattlemen are continuing to expose themselves to immense risks with questionable returns.  Whether a move higher on a wall of worry, or slide down a slope of hope, the cattle industry is in the limelight with much greater variances between cattle demand and beef demand.     

​Corn:

As cattlemen are reliant upon one another, that one will pay more than the other, the soybean farmer is to China.  China has not only been disappointing, but so to has this administration in placing such reliance upon one buyer.  Corn isn't much better either and with all three plummeting in price, the farming community, and all those that support, are believed a good example of what could happen in the livestock market.  Rationing has taken a toll on the processing side of the beef/cattle industry.  If rationing remains, by keeping the border closed to Mexico, production capacity will be the next in line to be reduced. ​

​

Energy:​

The price and direction of energy prices lead me to believe the US has entered into a recession.   This administration wants cheap food prices and high equity prices and businesses making money to keep equity prices high.  I am unsure how the farmer and rancher plays into this objective.  Nonetheless, falling energy prices, when throwing out more money in the means of lower interest rates, Reserve Management Purchases (quantitative easing), and now checks to the general public in the first quarter of next year, it appears that recession may be more prominent on Main Street than the growth of Wall Street.   ​

 ​​​​​​​​​​​

Bonds:

​Bonds are a half point higher, but a very volatile trading session to start with.  I anticipate bonds to soften. 

​

​​​​​​ “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.

​