“Shootin’ The Bull”

by Christopher B Swift

​8/22/2025

Live Cattle:

In my opinion, the notation made at the top of the "This weeks feedyard closeouts" in the weekly cattle range comments, about segregating commercial cattle feeders and those within a vertically integrated supply chain, should be taken to heart.  I have written in the past of vertical integration and the impact it is having on the purchasing of feeder cattle.  With this statement, everyone should be considering this when laying in cattle on feed.  What it distinctly does is show that those outside of VI are calculating margins based upon the price of feeders, feed, and fats at termination, while those within are believed in a profit-sharing agreement for which are privy to either wholesale, or retail beef sales.  This is believed why feeder cattle are able to continue to trade dollars over fats when historically the width between the two was of great significance in calculating returns.  As this year's production scheme is believed one of garnering market share, it helps to realize what the deep pockets theory may produce. While those outside of VI may be participating in the full extent of price gain, those within may not necessarily be seeing the same returns.  In the garnering of market share, when more inventory is made available, and potential profits turn into losses, those outside of VI may or may not suffer disproportionately to those within.  That is because the market share gained will have them trading at larger volumes and still potentially a better profit margin than those outside of VI.  This is great recognition of an issue that is causing significant price expanse.

 

Another issue is the feeding capacity of the south versus the north.  Southern feed yards are old and maybe somewhat antiquated.  They have relied on 3% to 5% of volume from Mexico for decades.  With the US shortage of cattle, and now the loss of imports, it further divides the two and suggests that the bulk of open pen space is in the south.  Northern feed yards are newer, with some newer kill plants as well.  The northern feed yards tend to receive a premium of $10.00 to sometimes $12.00 over the southern.  These issues are believed an advantage to northern cattle feeders and feed yards.  How does the south compete?  Long way around the barn, but I have stated before that there is woefully too much production capacity for the number of animals available.  All of the above leads me to anticipate the reduction of feeding capacity in the south.  If northern yards are as full as some make them out to be, and the beef/dairy cross primarily feed in the north, the loss of any pen space in the south could be difficult to find in the north.  Both should be privy to elevated feed and feedstuff's supplies. Currently though, the pricing of those items appears to be moving higher and not lower.  Keep in mind that both corn and soybean farmers are pressing the Trump administration hard to spur demand for both. 

 

On Friday, Fed Chairman Powell relented to the need for lower rates.  Lowering rates is a stimulus.  When an economy needs stimulating, it suggests that it is not stimulated.  With further adjustments anticipated of previous employment reports, and now Powell suggesting a need for a cut, the US economy is not expected to be in nearly as good of shape as economic numbers have presented.  If those jobs are revised, then inflation would be considered staggering as there was no increase in employment to justify, it was merely the mark up of price that was not demand driven. I see that in multiple industries of restaurant, insurance, plumbing, and HVAC where menu prices, rates and service calls are inflated.  Bonds were up nearly a point and poked their head back out of the triangle to the upside.  This leads me to anticipate bonds to move higher, interest rates lower, and were energy to fade, which I think it will, may reflect greater aspects of recession than inflation.  Energy spent the majority of this week trading higher.  I believe this to have been part of a correction of the initial move down.  Through the summer, I continued to anticipate a higher energy price.  With Iran now cowering in a corner, the potential for an end to the Russian/Ukraine war, and OPEC seemingly not going to cut production, I anticipate energy prices to soften.  Lastly, the on-feed report was in line with expectations with a slightly higher placement figure than anticipated.  The on-feed number dropped to 10,922,000 head on feed, the first time under 11 million head in over 2 years. Although significant, note that on feed numbers hit a seasonal low in the summer.  Carcass weights are anticipated to seasonal climb as well, with a combination of everything stated maybe softening some the hard stance on cattle prices.   

Feeder Cattle:

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​Corn:

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Energy:​

  

Bonds:

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 “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.

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