Shootin' the Bull about Dairy making waves in the beef industry again. Maybe a big one

“Shootin’ The Bull”

by Christopher B Swift

1/9/2026

Live Cattle:

In my opinion, cattlemen busted through the chute, knocked down the gate and ran rampage over one another to see who could bid the highest to own inventory.  Cattlemen acquired cattle this week within dollars of previous historical highs in the heavier weight categories and new historical highs in the lighter. All at a time when beef production is expected to stabilize, if not increase.  Comments read this week of a 200,000 head increase in the dairy herd in 2025, the biggest increase in 40 years, caught me by surprise.  Earlier in the year, it was believed the dairy industry was in need of a million head of replacement heifers.  This was perceived recognized around labor day, as that is when milk prices sold off sharply.  They are still wallowing at the lows.  With the dairy herd having increased by this much, and milk prices sub $17.00, it is possible that those older dairy cows find their way to slaughter, or potentially one more calf that was AI to a beef bull.  Either way, that is potentially an increase of beef or cattle coming into 2026. 

Futures traders narrowed basis at the end of the year, but this week has allowed it to widen out.  This was achieved with cattlemen paying top dollar for cash, but futures traders showing reserve in bidding futures higher.  I think the futures trader wants a little leeway between themselves and the cash price.  If cash stays higher, it wouldn't take much to close the basis in quick fashion.  However, were cattlemen to ease in bid's, the futures are believed to have a head start.  This week ended up pretty bad for both cattle feeders and backgrounders that use risk management.  The positive basis spread, and current price, doesn't appear to be beneficial enough for cattle feeders to hedge future procurements and the steepening discounts of futures are detrimental towards backgrounders' needs in marketing.  The observation of this is seemingly cattlemen are surrounding themselves with inventory as quickly as possible in hopes, or expectations, of someone paying an even higher price in the future.  The futures trader is believed watching the cattle feeder, and other producers, gulp down negative margins for which appear very difficult to recoup without a significant rise in cattle prices.  The evidence of this is believed the high cash price and low open interest of futures. Futures traders don't share the same enthusiasm for owning cattle at these prices as they once did. As well, I think producers will be much less likely to use risk management with last year's hindsight fresh and the abrupt bidding taking place in the cash markets.  This has the potential to exaggerate price moves as enormous leverage is believed having been acquired.  I recommend you consider the above and attempt in some manner to consider that 2026 may not be anywhere close to forming a long-term trend higher.  Especially with prices today nearly, or already higher than in '25.  

Corn trading is about as fun as watching paint dry.  Monday's WASDE report is about the only factor coming up that may move prices and I don't think there will be enough disappearance to make a difference.  Soybeans are anticipated to continue in their bear market, but unsure how large of a correction may take place before resuming.  With the Tariff results delayed by the Supreme Court until the 14th, beans didn't get any interaction from what details may have come out.  The President has stated they will attempt to circumvent any ruling against the Tariff's with other laws, so there is no telling what may transpire.  With China nearing the completion of soybean imports promised, and South America harvesting a record crop, I don't see much hope for beans at the moment.  Energy prices continued lower into the first of the week, with an early Thursday morning reversal that pushed energy prices sharply higher into Friday's close.  I think this was due to the increased capturing of oil freighters on the high seas from Venezuela.  As most likely that oil was headed for Russia or China, they might have wanted that oil to.  Prices shot higher, but I anticipate oil production to increase significantly, leading me to be bearish energy prices.  Further escalation of capturing oil freighters may void this thought quickly. Bonds ended the day a little higher, but the stagnation in bond trading continues.  I anticipate a breakout to the downside as core inflation continues to rise, just at a lower rate.  Commodity inflation is still low and would be even lower on the commodity indices were metals to have not had so much of an extensive price gain. The division continues to hurt some business, even with a lower beef or meat protein price.  A story this week on our local news channel showed multiple restaurants closing in '25 with all citing the higher rents and services as the cause, and not food prices.  As a creature of habit, I have found restaurants we frequent to have raised their menu prices as well.  I point this out to reflect that not everything hinges on consumer beef demand, and that other factors can take place that would reduce beef demand through the number of places to purchase.  With this being my 35th year as a commodity broker, analyst and trader, I am as excited and looking forward to the upcoming price fluctuations and management of this year as any other time.  

“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.