Shootin' the Bull about no secrets

“Shootin’ The Bull”

by Christopher B Swift

1/7/2026

Live Cattle:

It appears no one is left that doesn't know how difficult of a profit margin position the cattle feeder, and producers as a whole, have placed themselves into.   Futures traders have been of no significance in offering foresight into higher or lower prices.  The futures have pretty much remained in lock step with cash, suggesting that all of the creation of negative margins, due to the wide spreads between start and finished, is caused by the cattlemen themselves.  Stating the obvious for the past several days has had no impact until today, and I am unsure that is why prices were lower. Nonetheless, cattlemen appear to be in the process of surrounding themselves with expensive inventory, only $12.95 from historical CME index reading, in hopes or expectations that someone will be wanting to pay an even higher price. 

Now, I do believe that vertical integration has taken a large step the past two years in which a greater percentage of the cattle, no longer available to the open market, remain in production.   Therefore, it may well be that some have to buy at these levels, simply because they have to. Regardless of anything, cattle feeders have subjected themselves to negative margins for which only a sharply higher price will return input costs.  A sideways or lower price range has the potential to produce losses equal to some of the gains seen in the summer of '25.  Bettin' on the come remains the preference of choice for cattle feeders.    

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Feeder Cattle:

There is little to say that all do not already know.  The cattle feeder is working themselves into a position for which there is only one way out.  From what I have heard and seen at sale barns, backgrounders are quickly catching up to the cattle feeder in entering into a production cycle deep in the red. Think about this.  The north is chocked full of long fed cattle with additional pen space being built.  The south is starving for cattle for which there is no relief in sight, and even if was, may not have the same impact on price or volume as would have 6 months ago.  Hence, if production capacity in the south has to, or voluntarily, reduces pen space, the north may not be in a position to accept all.  As processing capacity has already begun to shrink, most likely creating a more efficient running of plants, production may have to contract in order to remain competitive. If materializes, I would anticipate this to ripple through the feeder cattle market. As well, I don't think there would be any forewarning of such due to confidentiality.  

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​Corn:

Corn traders continue to beat a dead horse.  Soybean traders are trying to push prices higher to sell into and wheat traders are believed having moved to some other arena.  I have no doubt that prices can rise in a supply laden market, but I have reservations as to how high, and I can't seem to find much that would consume large quantities of grains and oilseeds.  Drought is what it will take to reduce the '26 crop and lower '27 supplies.  Although the drought map shows some short and long term drought areas in the corn and soybean belt, winter snows or rains have the potential to increase subsoil moisture before spring.  Betting on a drought to lower supplies, with more drought tolerant plants, is a tough bet.  So, I recommend visiting the weather and long term forecasts that may help to see if a weather impact is more possible than not and use that to help make marketing decisions based upon.  ​​

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If you think you want to trade a drought, then consider July '27 out of the money corn calls.  If the '26 corn crop is short, it will be even shorter come July of '27.  Corn has been in a very narrow price range and is believed prone to break out as this year's planting gets underway.  If lower, I've already made the recommendations to own the $.20 out of the money December puts.  If higher, there is a lot of room to the upside and the $6.00 out of the money calls in July '27 are approximately $.11&3/4.  I recommend you do some considering on this as farmers will need both, downside protection and a lot of upside benefit. 

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Energy:​

​Energy prices have resumed their down trend. Diesel fuel continues to lead the way and this is more than alarming.  Crude and gasoline are hot on the heels of diesel, but unable to catch it yet.  This situation is expected to further the divide between commodity deflation and core inflation.  Interestingly though the commodity indexes are not moving lower, simply due to metals having made such enormous price gains and energy somewhat muted losses.  Every day needed commodity items in the wholesale markets have been going down or stagnated.  When coupled with higher core inflation, a wider profit margin is anticipated for restaurants and some retail businesses.  Most have noted the slight rise in restaurant prices lately and here in Nashville, multiple local restaurants did not make it through 2025.  High rents, insurance premium increases, beef prices, and further division of wealth are to blame. The first half of the year will be interesting to watch unfold with what appears to be deflation of commodity prices and higher core inflation. ​​

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Bonds:

Bonds were higher today and have become very volatile.  The back and forth in a little more than a point range doesn't offer much in the way of deciphering the next most probable move.  I continue to anticipate core inflation to rise, simply due to the quantitative easing, now in full swing.  I anticipate commodity inflation to subside further as cattle prices are just shy of historical levels and metals are at their highs and nothing else is. An relief in the fear that caused the buying spree in metals for a safe haven would lead me to anticipate a sharp drop in metal prices.  As well, if the lower commodity price is a sign of weakening consumer spending, and core inflation higher, due to government spending, this first half of the year is expected to strain consumers further.  ​

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​​​​​​ “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.

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