Live Cattle: Traders continue to step up to bat for cattle producers in their desire to assume your risk at premium on the front end and significantly narrower basis to the back end. Back month fat cattle are now at starting spread widths between feeders and fats, equaling the spreads from starting feeder in October '25 to April fats '26. The Oct. '25 feeder - April '26 fat peaked at $131.65 spread. The past 4 weeks of negative profit margin is from those cattle placed in the October/November time frame. Today's spread width of May feeders to October fats is $131.87, leading to the same negative margin projections as are being realized today from a like starting spread. Input costs, outside the feeder cattle, are higher starting off this year. While none of the above is believed a directional motivator for price, it does reflect the amount of risk producers are assuming at the current known highs of cattle prices. It's not that a high price can't be reached and input costs returned, it is that the price "has" to go up to come close to returning input costs. The "has" to part of the equation is what worries me. So, to keep a poor starting margin from growing worse, do something to manage the risk you have assumed when placing at these spread widths.
I recommend owning at the money put options for those that do not want to meet margin requirements or limit upside potential.
I recommend owning the at the money put and selling the out of the money call for those that want the advantage of a higher minimum sale floor, in return for limited gains to the short call strike price.
I do not recommend selling futures unless spot month coverage is needed. This may be tricky, but I would sure be looking for a cash forward contract that was equal to or above the April futures before marketing with futures. These are sales solicitations.
Feeder Cattle: Traders in feeder cattle have stepped up as well to produce a negative basis in the front end and significantly narrower to the back end. This has widened the spreads to cattle feeders, as well as, taken away a large advantage some cattle feeders were using as a long hedge for procurement. The price rise of feeder cattle futures, with not nearly as much gain in the cash, widens negative margins further, leading to more risk of loss being assumed by the cattle feeder. Backgrounders are believed in a similar position, but at new, and widening historical widths between lighter cattle and feeder cattle class. I think it possible that due to drought risk, and potentially even higher input costs, backgrounders may be stretching themselves a little thinner than their cattle feeder counterpart. As above, it's not that a higher price can't be achieved, it is that it "has" to.
Due to proximity to historical highs in cash and futures, I recommend you review the remainder of the year's potential with still not having planted the corn crop, military actions in the middle-east, and a President that has an uncanny ability to move a market with a tweet. These factors lead me to recommend making some difficult marketing decisions, whether you want to or not. If you are going to pay premium on the front end, manage that risk you are assuming. The most recent rally has produced new contract highs in some of the back month feeder cattle contracts. However, they remain at a discount and it appears top dollar still being paid for any thing light. So, while basis is tight, and new prices paid in the future for the cattle you own today, get a scotch under newly acquired inventory and roll up any lower strike options when applicable. This is a sales solicitation.
Corn: Traders are believed to have digested the report. Today's lower trade found support at the top of the sideways trend channel in December corn. I recommend cattle feeders and backgrounders own the at the money, or slightly out of the money December call options and out to the July '27 call options were this years yield impacted. This is a sales solicitation. The combined fundamentals of starting off a new crop year, and significant military actions in oil producing countries, leads me to want to protect the price paid, for what few input costs there are, still at a lower price. Beans recovered from the lows as well. Bean oil was down sharply. I anticipate both to move higher. With corn and beans believed in a minor correction of fledgling up moves, I recommend taking action sooner than later.
Energy: Energy has been higher and lower, multiple times and in great price expanse. The President tonight is expected to discuss the military actions with no telling how the computers will react to key words he may or may not use. Of one thing, I would anticipate a significant price range and potential further escalation of events to bring a resolve, instead of just abandoning the situation. Due to the start of planting season, and still a massive military excursion laden with unknown intended and unintended consequences, diesel fuel is expected to continue higher.
Bonds: Bonds and notes ended the day lower. Inflation continues to soar with some seeing an impact in this morning's ISM manufacturing report. As this current event was created out of the blue, still not complete, and no way to know what intended or unintended consequences of the military actions will be on the US economy and consumer, I anticipate inflation to continue higher through commodity prices and further government stimulation by the means of quantitative easing. Were the President to get his wish of cutting interest rates, inflation would be anticipated to soar.
Christopher B. Swift is a commodity broker and consultant with Swift Trading Company in Nashville, TN. Mr. Swift authors the daily commentaries "Mid Day Cattle Comment" and "Shootin' the Bull" commentary found on his website @ www.shootinthebull.com
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.
