“Shootin’ The Bull”
by Christopher B Swift
1/20/2026
Live Cattle:
My opinion on the Mexican border is that enough time has transpired to facilitate an increase in production and processing capacity to increase domestic beef production. Whether that beef is consumed domestically or exported abroad, it will reduce US exports to Mexico, or increase imports to the US by whatever amount is produced. While still only approximately 2% of US production, it is most likely a much larger percentage to Mexican production. For those who were reliant upon cattle from south of the border, consider making some adjustments in production towards not having those animals at all, or in a lesser capacity.
The packer is taking measures to reduce negative margins. Cattle feeders are taking measures to increase time on feed and weight, in an attempt to not have to average in more expensive cattle to the mix. Grocers and restaurants, including hospitality, have all kept shelf and menu prices elevated, while box prices have softened, helping them to return to positive margins. Consumers are believed in a holding pattern with no expectations of ability or desire to pay a higher price, but seemingly content at current price.
All the while the above factors are taking place, cattlemen continue to trade cattle amongst themselves in expectation that someone else in the future will pay even more than they did. The increased need for working capital is believed straining lending practices, as well as, simply causing producers to assume more of the inherent risks associated with commodity production. I also believe there is a shift that is taking place for which last year, the cattle feeder bore the weight of Atlas in the negative margins created when purchasing feeder cattle. Today, the reflection of growing what is on hand larger, and the price of heavier animals not moving as high as the lighter weight categories are, signs the cattle feeder is attempting to resist the higher price and egregious negative margins at placement. Not the backgrounder though. They are the sector believed purchasing lighter weight animals at new historical highs, in anticipation of the cattle feeder to pay whatever necessary to bring them into their yard. With the north chocked full of inventory, and the south bleeding from low volumes of inventory to work with, I don't foresee a time when cattle feeders go bid for inventory, at any price, like what we have recently seen some backgrounders do. I believe the time frame of all sectors moving in the same direction has come to a conclusion. Going forward, each sector will have to do what is necessary to keep profit margins or find profit margins. Evidence of this is seen everywhere and in every sector.
Feeder Cattle:
Backgrounders have bid themselves into a corner and now hold the record for owning the most expensive inventory in history. Backgrounders are faced with having paid historical prices in most lighter weight categories, a positive basis to contend with, and a cattle feeder in no hurry to add insult to injury in the way of averaging in more negative margins. All sectors are believed reliant upon an ever increasing price for which may or may not materialize. Cattlemen trade cattle amongst themselves and at this time, are not believed concerned with cattle feeders entering into severe negative margins, packers bleeding red ink profusely, grocers and restaurants making their own margins, and the consumer faced with rising inflation and potentially a acceleration of, if the President's new Fed Chief is a "yes" man. We were educated further this weekend on how quickly inflation can spiral out of control, and historical events so dramatic, that the inflation was stopped dead in a very short period of time. All while you own the most expensive inventory to date. As difficult as this will be, I recommend you attempt to disregard last year's abnormal price advance and sequence of events that promoted such. I recommend you stick to your marketing game plan with expectations of a wide, but narrowing price range is anticipated to top between now and mid-February, trade lower into May and then see how much of a summer rally materializes. All in all, I think it more possible than not, the highs at present are the highs for the year. Cheap feed is abundant around the world and cheap feed makes for cheap meat proteins.
Corn:
The world is swimming in grains and oilseeds. US farmers are not anticipated to reduce acres while being subsidized. Without a crop failure, somewhere around the world, and hopefully not here, there is little way to feed this much product to the livestock available without significant help from biofuels.
I recommend you sit down, consider whether you are going to raise a crop this year or not, and if so, get busy marketing portions of, that will be of benefit if prices continue to decline, and won't be a detriment if prices rise. This can be achieved in several ways to meet your tolerance for risk. To make this as simple as possible, you can floor the current price with an at the money option for between 5% and 6% of the value of the contract, or you can create a marketing window that will raise your minimum sale floor, but cap upside potential beyond a predetermined price point. It is that simple. Now, for the remainder of this year, you will have a floor in some instances and maybe a higher floor and a price cap in others, but both will allow for some or all upside potential that may materialize. The problem most will run into is that they have a difficult time living with hindsight, were it to prove a higher price could have been achieved. I think this a year to be dissatisfied with having to make decisions based upon unfriendly fundamentals, but making them anyway because the fundamentals are so unfriendly.
Energy:
Energy was higher. I'm not convinced this is the start of a bull market. The President seems to want higher core inflation to keep publicly traded companies share prices moving higher and doesn't want commodity inflation so consumers will have more money to buy stocks with. I am unsure how you have both, but in all honesty, if core inflation continues at this rate, or accelerates, commodity inflation would be anticipated to decline sharply, as consumers battle insurance premiums, healthcare costs, housing, and taxes. These are the core inflation items believed draining more consumers than anything else. I think energy falls into the category of the President wanting a lower price as well. Any calming of recent rhetoric would lead me to anticipate a sharp decline in energy prices.
Bonds:
Bonds were sharply lower as inflation continues to rise. Maybe albeit at not the same rate as previous, but still rising nonetheless. A great deal of comparisons were made over the weekend between present inflation and that of the Jimmy Carter era. President Carter appointed William Miller as his first Fed Chief and watched him do absolutely nothing to quell inflation while it persisted monthly. A supposed friend of Carters, he didn't want to make a stink, so he moved Miller to the Treasury and appointed Paul Volcker. Paul Volcker was independent and started raising rates with a dramatic jump that lasted for 3 years and culminated at around 18%. Trump has 3 more years and is about to appoint what is considered a "yes" man to the Fed. I think it possible that bonds are reacting to a greater potential for inflation than recession.
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