“Shootin’ The Bull”TM

by Chris Swift

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October 16, 2026

 

Thank you for subscribing to "Shootin' the Bull."  Navigating the immense price fluctuation and volatility has never been more important with the amount of working capital at stake.  We consume as much information as possible, from all sources available, decipher it, and relay our findings to help you make the most informed decision possible.  

 

Live Cattle:

In my opinion, it appears to me that the cattle and beef market have hit a resilient stagnation time frame.  The resilience of the consumer to pay current price, and consume at current levels, is stagnating.  It may not have gone down much, but has not increased.  This is visible in the price of box beef and the load counts.  This stagnation is believed most noticeable at the center of the plate, but has crept through the supply chain as noticeable by little reduction of retail price to consumer, that improves margins to grocers and restaurants.  Packers continue to manipulate slaughter, stagnating the amount of beef movement.  Cattle feeders continue to stagnate placements, in the attempt to lower the supplies further and keep from raising the average price of the cattle they have on feed.  Movement of stockers and feeders have stagnated, but the resilience of the producer to pay the same, or more, continues.  The problem I see with the stagnation of movement and resilience to price is that it backs cattle up, and when paying a higher price for, it reduces margins or makes negative margins worse.  This has led to a much more perplexing time frame than this summer.  Through the summer, we did not know how high prices of cattle or beef would go.  Now, we at least have a barometer to go by from the historic highs of the summer.  This time frame suggests that either cattle and beef prices have to move higher in volume and price, or they will be backed up further, and the age-old adage of "you got to sell 'em or smell 'em" may come back to the vocabulary. I continue to not know to what extent a cattlemen will go, to stay in the cattle business.  That's what makes this time frame so important and we are finding out quickly, as profit margins remain thin or nonexistent. 

 

Traders this week in futures further curtailed the carry spread in the feeder cattle market.  Front end wasn't as high, or back end was higher, keeping the spreads moving towards carry.  Although traders have skewed the spread between starting feeder and finished fat, to the tune of about $22.00 since 8/26, they have narrowed basis greatly in feeders and reversed to negative in fats.  With this, has come price gains to Fibonacci retracement levels in both time and price.  By Friday's close, most fat contracts were at the 50% retracement level of the decline from contract high to the 8/26 low.  The decline took 80 trading days and as of Friday, the correction is 36 days.  The feeder cattle market has retraced .618% of the initial decline, and in the same time frame.  Whether these price levels hold or not, they are important at the moment.  I kind of get the feeling that producers have made headway in protecting the downside.  There is no doubt that economic worries and hyperinflation are a detriment to consumer spending. It would be natural for producers to take an opposing position to make sure these factors didn't impact the price of beef or cattle.  That suggests that some of the reasons for the rally's abruptness is a lack of selling.  I think the lines in the sand for some are drawn to the point of; they have already made decisions to hedge, or are not going to regardless. With basis narrowed, and carry nearing normal, producers may not have any better idea if price is going to move higher or lower, but do have significant improvements in price and basis to work with.  Splitting the difference can mean different things to different people.  Some think it is vanilla and not worth taking half of something. Others find it a great way to meet in the middle and at least achieve half of what may or may not be.  I think it is important to consider what is at risk.  If something you want, maybe or maybe not.  If it is your livelihood that you gave up 50% of an unknown factor and missed out on the opportunity, it might be harder to explain that to your lender, partner, or clients. With price 50% better than just 7 weeks ago, and this rally lasting about 50% of the time it took to go down, you have some incredible decisions to make at this price level, with no shortage of factors to contend with. 

 

The sharp decline in corn will be of great benefit to producers, the same as if price went up and you were hedged with long call options.  If corn continues lower, the few cents a month lost on the call option will be difficult to see in the end results.  I'm not recommending buying any more calls at this level.  It may take a while longer to overcome such dramatic changes in supplies of corn.  Beans and bean oil have lost their flare to.  With both of these markets as components of energy, it is difficult to see them go down in price while making new contract highs in diesel fuel and sharp rallies in crude and gasoline this week. Energy continues to move higher with expectations of potentially going parabolic.  I don't say that lightly.  Exceptionally low stocks of diesel, refining capacity unable to increase to any significant level, and military actions around the world disrupting transportation and distribution of energy products are serious. With no increase of refining capacity or reduction military actions, the only factor to push energy lower are tweets by the President, intended to influence the price. To throw insult on to injury, skyrocketing interest rates have begun to disrupt some of the best laid long-term plans.  Equities are beginning to wane as well.  The inability to push much higher, on each new high this year, and only a few stocks stoking the fire, creates a fragile stance while consumers are battling the entrenching inflation.  So, all in all, there is a steep wall of worry in front of us, and it will take every means of precaution and planning to get over unscathed.