“Shootin’ The Bull”

by Christopher B Swift

​9/09/2025

Live Cattle:

No other market was subjected to the severity of the employment revisions as cattle.  I think this goes hand in hand with the statement from McDonald's last week and the "two-tier" economy.  An extremely popular fundamental has been the employment sector strong, helping to support the higher beef prices.  With a sizable chink in the armor of US employment, and still really no telling what it is, grocers and restaurants are expected to be overly cautious about buying out in front, leading to the potential for packers to not need as many cattle.  Futures traders took this news to heart, leaving a wide swath in basis in one day.  More is expected with a downside projection to the low made on July 2 per respective contract month.  I chose this target due to the angle of accent increasing from this low, the oscillator having traded below the zero line, and a substantial increase of open interest.  Therefore, the next most probable move is back to this level.  While most likely not straight down, but with knowledge that the President is aware of beef prices, and made statements about, were anything from the supply side to shift into more cattle or beef, then it may be pretty much straight down for a while.  With this believed a topping event, or at least for a while,  producers should expect to have to assume significantly more risk than previous.  While timing has been difficult, basis functions, price, and options spreads availability have allowed producers opportunities to manage risk in a very favorable environment.  With futures traders having brought out the trackhoes today, I don't expect the same going forward.   

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Feeder Cattle:

​Feeder cattle locked limit down with options projecting another $2.50 to $3.50 lower opening in the morning.  Recall that options have no limits and can continue to trade, and will be priced representative of the underlying futures to the next day's potential price movement.  As above, traders brought out the trackhoes and dug a tiger trap over $28.00 deep in the spring months, with another $10.00 to $20.00 possible before weeks end.  I don't think it will get that serious on just the employment debacle, but were any hints of the "policies" kicking in, that would apparently reopen the border and or cut tariffs, the deluge could be longer.  As above, the July 2 low per respective contract month is the downside target. If correct, then October still has approximately $50.00 to trade lower. ​Due to the width of basis, the potential for sharp rallies can't be ignored.  It will most likely be into next week before the index reflects what the impact of the employment report has on cattle feeders.  Of the most impact would potentially be going from current $500.00 profit to over $300.00 loss projected if fat cattle trade at the July lows. 

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​Corn:

Grains and oilseeds remain lethargic and not expected to change by much in the coming weeks.  Harvest will be the next event to move prices, and for most, that is still a few weeks away.  Were corn to have a bad day in the next week or so, I will recommend buying the July call options to help keep cattle feeders from potentially having to feed expensive corn to expensive cattle.   ​

Energy:​

​Energy was a little higher.  The employment revision seemed to have little impact, due to escalation of Israel's attempts to quell Hamas. Were this to settle down a little, I would anticipate energy to soften due to fewer consumers employed than previously thought.  However, with the President set on lowering rates, inflation can rear its head quickly and when the printing presses are heard, Pavlov's dog's start salivating.  I remain a little bearish energy, but it is not going down in leaps and bounds at the moment.  

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Bonds:

​Bonds softened with a pretty much buy the rumor, sell the fact price action.  I anticipate bonds to stagnate until next weeks FOMC meeting and then higher to sharply higher, depending upon how much rates are cut by, as well as, further verbiage on the next one.  ​​​​

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