“Shootin’ The Bull”

End of Day Market Recap

by Christopher B. Swift

​4/4/2025

Live Cattle:

In my opinion, this is not the hill cattlemen want to die on.  There are two opposing forces at the top of the hill.  One is simply gravity. What goes up must come down.  The second is a wall.  At all junctures in bull or bear markets there are walls in place.  Some are from previous years' highs or lows, while others are limits for which a consumer will no longer increase willingness to spend, or ability to consume more.  Yes, these walls can topple, but at the moment, it appears a rather stout wall has been erected that is producing significant resistance to some.  Those "some" are futures traders and they have shown that when the music stops, they don't look for a chair to sit in, they leave the party.  Thursday's lower trade became a precursor to today's limit down move.  Again, more likely than not, futures traders were making decisions based upon their outlook, while producers are expected to need the weekend to decipher the past two days of exceptional trading in all markets. As producers familiarize themselves with the volatility, and continual shifting of consumer spending, know that current inflation is not commodity inflation.  Most all commodities topped in 2022 with the bulk still trading at lows.  Cocoa, cattle, and gold are the only inflated commodities there are. So, don't think that a break in gasoline prices will spur consumers to go eat more beef, or be more willing to pay a higher price.  It will take significantly lower fuel prices just to offset the last few weeks of rising beef prices, that haven't topped at the retail level yet. Insurance premiums of every form, health care, frivolous consumer spending due to excessive government printing of money, and just about all goods and services are what has inflated the economy, not commodities.  Recall that most all economic inflation reports exclude food and energy.  The decisions producers make over the weekend, to either just keep bidding, or show reserve in, will help to see which way the recent widening of positive basis will go next week.  Even wider, or converge?  Regardless, the backhoes have been brought out and have dug an exceptionally deep hole.  While many have sweated bullets, equity, and blood to remain hedged, all marketing's against newly acquired inventory has presented the producer with a rising average sale price that by years end, could possibly have been the highest prices for the year. 

Input costs this week gave producers an opportunity to lock in those needs at a considerably lower price in fuel, and if quick enough as much as a dime lower corn. Note the opposite end of the price spectrum between the feeder cattle you are going to buy and input costs you are going to have to buy if you buy the feeder cattle. That spread alone suggests that while the trends may still be intact, any changes in will have significant consequences.  The price of money was a whole lot cheaper over the past two days as well.  With expectations of bonds rallying further, suggesting a need to spur economic activity, it should be of benefit to newly acquired lines of credit, or existing ones through the lower retail rates offered.  Although the products of energies are applicable, the options of are very illiquid.  Therefore, crude oil options are believed to be more viable to use than the products.  With the percentage moves nearly identical in all three, there may be some discrepancies in price fluctuation, but not believed by much.  The reversal of poor government policy can be painful as we all know what it is like to attempt to live within our means after having spent too much.  Being unprepared for such can be even more painful. As hindsight is 20/20, and we are not the only ones having attempted to present logic in what has appeared as a very illogical market, we hope you have benefited from the comments and recommendations made.