"Shootin' The Bull" Commodity Market Comments...
For Tuesday, November 25th
Live Cattle: The basis is believed wide enough that futures traders may need further reason to sell futures out from underneath the cash market. With a belief that there is not that much more bearish news to come out, barring a time line on the southern border, I anticipate more convergence of basis than further divergence. The Moore Research shows a strong seasonal tendency to move higher from the first week of December to the second week of February. The extent of the move lower leads me to recommend doing something with previously recommended short positions. That may include, buying back short call options, rolling down long put options, selling put options against current short positions, or buying call options. Any one of these may help you to manage potential open position equity in a way that captures portions of while still maintaining a net short position.
Feeder Cattle: The basis spread is deep. So deep, that one may want to consider capturing as much open position equity as possible and then see what the cattle feeder may do going into the next year. At today's close, the index is nearing the first retracement price of $325.00. The second retracement price is $309.00. January futures were under that by nearly $10.00 at the opening. So, with the index nearing the first retracement level, and the same seasonality for moving higher in December through February, I recommend you do something to capture as much open position equity as possible.
Cattle feeders that were willing to step up in the sale barn, and pay more than the index price through the summer and fall, should be scrambling over one another to own cattle nearly $90.00 cheaper than at the high just 7 weeks ago. No need to go to the sale barn and no need to wade mud or manure as the cheapest feeder cattle, ready to place on feed, are in the futures market. Whether prices do move higher or not, the cheapest place to own inventory is on the board.
I continue to believe the southern border is a matter of when, not if. As well, I think it has already been traded into the market fundamentals and when a time line is announced for the reopening, it may not have the same impact as if it had been announced earlier this fall. We likened the summer and early fall to having been constricted in a way that we could not move freely. Now, everyone can move freely with seemingly only a few that were benefiting greatly being in a constricted market.
Corn: All firmed by the close today. I recommend owning July Chicago or KC wheat with a sell stop to exit only at $5.40 Chicago and $5.38 KC. This is a sales solicitation. The drought monitor shows a great deal of winter wheat acres in some form of drought. I understand the multiple deaths wheat can endure, but I'll keep a close watch on the drought death. For cattle feeders, with margins now based more on input costs than price advance, corn prices will become more important. I recommend you consider your corn needs and look out to new crops of '27 and '28 for which the destruction of price this year could cause some contraction of planted acres in the coming years.
Energy: Crude and gasoline were sharply lower after some hints of the Russian/Ukraine war settling down. Crude dropped $1.50 in 3 minutes this morning. The products were lower as well and this lower trade appears to push crude back into a bear market.
Bonds: Bonds were firm today and made advancements towards the old high. I remain skeptical about this taking place. The desire to stimulate even more is expected to further divide what appears as a two-tiered economy. A post from X website today was interesting about this factor. I asked AI about it, and this was the response:
- The post shares a Fortune-cited statistic from Federal Reserve data showing the top 10% of Americans own nearly 90% of equities as of Q3 2025, up from 89% in prior quarters, reflecting deepening wealth concentration.
- This group drives about 50% of U.S. consumer spending, per Moody's and Fortune analyses, making the economy vulnerable to stock market swings that disproportionately affect affluent households.
- In context, the stat aligns with Ray Dalio's November 2025 warning of an AI-fueled market bubble exacerbating inequality, potentially leading to a "politically explosive" bust if growth falters.
