Copyright Barchart
“Shootin’ The Bull” by Christopher B Swift 10/30/2025 Live Cattle: I anticipate Friday's trading activity to be very near today. The wash out of participants came Monday through Wednesday with this morning's open interest left at 337,700 contracts. That is from over 400K at its peak. The loss of participants is believed causing the increase of volatility, where as Monday and Tuesday were simply lower. Wednesday allowed everyone to trade and most likely made believers out of those that could not see cattle or beef prices trading lower. With only rumors and expectations moving the market at the moment, imagine what it will do if or when rumors become facts and expectations are met. Cattle feeders are believed in a precarious position as none of the contract months, at contract highs, would return the inputs with the price paid for feeder cattle up to October 16, with the 8 days from previous contract high to the new contract having cattle feeders inhale negative margins. So, consider that without a new contract high, curtailing losses may be the best action to take. Hence, cattle feeders are going to have to assume significant price direction risk. Basis risk isn't as much as in the feeder cattle market, but still an issue going forward. The only way I know of to have your cake and eat it to would be to own the put option only. This produces unlimited upside potential of cash, and produces a minimum sale floor. For this, the cattle feeder will take one whale of a haircut. Selling calls to lessen the premium of the put will cap any upside potential to the short call strike price. Depending on how much futures rally, will help you to make this decision as to whether a higher price is sought or a higher minimum sale floor is. For the moment, I continue to anticipate a violent sideways to higher trade to materialize. Feeder Cattle: The below is from yesterday because it remains as the best way I know of at the moment to approach this current situation. The comments on the feeder cattle are made under the premise the top has been made in the feeder cattle market. Via the CME feeder cattle index, a retracement of the most recent rally from 9/24 to 10/25 would produce price levels to consider at $325.00 .382%, $309.11 .50%, and $293.20 .618%. With futures already having equaled, or surpassed, the .382% level, it leads me to believe there is still downside risk to either of the lower levels. Since there is tremendous unknowns circulating at the moment, it may give producers some time to review what they need to do and how to achieve it. With an initial thrust lower, a correction of this initial decline is anticipated. If materializes, I believe will be an opportunity to lay off further risk before potential discovery of the .50% or .618% price levels. I think the time line for the creation of the right shoulder to be between now and well into December. After such, I would anticipate a decline that moves towards the Fibonacci retracement levels towards the spring of the year. I anticipate the .50% or .618% retracement levels to be met by one of the three spring contract months of March, April, or May. As above, this will have to be a business decision based upon achievable market price levels you can live with. To make matters worse, the above retracement levels are only calculated on the rally from 9/24 to 10/25. When viewing the entire rally from 2020 to 2025, a 50% retracement levels comes in at $241.00, about $3.00 under the previous all time record high. I think it will take all of next year to trade down to this level with the August, September, or October contract at the lows represented by a 50% retracement of the entire rally. The charts below shows the index retracement levels and what those prices may look like on the March and August of '26 contract months. Take this with a grain of salt, but this is how I think next year will unfold. A note to this is that I pretty much thought the same thing last year. With the extent of price discovery this year, all aspects are in just a wider price parameter. Corn: Beans took some shorts heads off early this morning before several even rolled out of bed. The President continues to achieve goals, so I have little reason to bet against him. Corn simply tried to tag along, but there was little in the corn market. I still think corn can claw its way up a wall of worry. I recommend cattle feeders own July corn call options for the simple reason to fix a variable feed cost and not having to worry about that with the price of feeders placed already. This is a sales solicitation. This recommendation is not necessarily due to being bullish, but as to not have to potentially feed expensive corn to expensive cattle. Energy: Energy was and turned higher with diesel fuel leading the way again. As diesel is the fuel source of production and distribution, it is inflationary, even if just a commodity the government chooses to ignore when calculating inflation. Core inflation remains there task and it seems to be cooking right along at over 3%. Even though I believe the US is headed for recession, it doesn't mean energy can't spike, simply because it is a commodity and susceptible to every supply and demand factor there is. As well, the price is moving higher for energy not lower. Bonds: Bonds continue to be soft and my belief is that fewer countries have any interest in buying US debt. As well, were there to be any increase of commodity inflation, specifically energy, I believe it would exaggerate the current situation of a further divide in a two tiered economy. With CEO's last month forewarning that their metrics are pointing more towards recession, and today's comments from Heinze's CEO the same, it appears those with minute by minute sales data to go by and their corporations working while the government is shut down, I'm going to adhere to what these companies CEO's are foretelling. Just think about why the President wants lower rates and now stealing a plan from the Biden administration of loan forgiveness, he doesn't want a recession either, and therefore attempting to stimulate the economy. “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.
