“Shootin’ The Bull”

End of Day Market Recap

by Christopher B. Swift

​4/15/2025

Live Cattle:

With the massive loss of open interest, and suspected mostly commodity funds, the rally in futures appears as short covering.  Cattle feeders that marketed or forward contracted cattle needed to buy back short positions as they had secured the cash transactions.  I don't foresee the commodity funds coming back for another round of buying at these price levels, or narrow basis spread.  Cattle feeders continue to push the envelope as to how much input risk one can assume to produce a pound of beef.  Further widening of the spreads between starting feeder and finished fat just keeps any sort of profit margin at bay without a significantly higher fat cattle trade.  A funny comment was made today in that when I press the issue that cattle feeders are doing little when other sectors appear to be making significant adjustments.  The laugh came when I was told that cattle feeders have already made their adjustments, they are simply going to feed cattle to the size of Elephants.  As whimsical as that sounds, it's not too far from the truth.  So, everyone is manipulating something to produce a profit margin. I find that more than interesting that an entire industry is hinged on manipulation of production and processing while pouring out working capital like water. What it simply exposes is that there is woefully too much production and processing capacity for the number of animals available.  Speaking of numbers, the on feed report is expected to catch up on the lower placement of February.  When combined with an even marketing, 11.65 million on feed is my trade guess.  That will be month 32 over 11 million head.  No expansion took place at all in the fall of '24 as current heifer slaughter is at a 15 year high.  With drought aspects on the front burner in a lot of cattle country, expansion is not expected to start this year either.  

Feeder Cattle:  

Traders filled the gap on the August contract.  I believe producers are the ones buying back futures contracts to take advantage of the previous basis spreads, or covering shorts as cattle were marketed.  Nonetheless, today the futures are at the same level as prior to the tariff issue and again created an exceptionally wide start between feeder and fat.  I continue to believe that marketing newly acquired inventory will produce the highest averages for the years marketing's.  Basis is even to the August contract and not too far behind in the other months.  If attempting to hedge July sales with August futures, I do not recommend selling the call option, simply due to not enough time to allow for full convergence of basis.  If able to market inventory at the expiration of the contract month, then I do recommend you use the fence options strategy to help reduce the put option premium and raise the minimum sale floor.     ​​

Corn:

Corn traders took a breather today, allowing for cattle feeders to fix more input costs while still at a lower price level. Beans appear stuck in a wide price range, but sideways looking more or less. Wheat is still in a bear market with potentially some issues domestically, but world supplies adequate. ​​​

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Energy/Bonds:

Energy was lower, but not by much and was able to mount a small rally towards the close.  With energy having made a 4 year low last week, and expectations of market's returning to levels prior to the tariff events, I continue to recommend topping off farm tanks and booking planting needs.  Bonds and notes were a little firmer today.  The spite selling of US debt appears to have subsided a little.  I continue to anticipate equities to be in a bear market.  The enormous volatility and price expanse is expected to give way to further selling as it will be more difficult to find more money to buy more things with. 

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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.