In my opinion, cattle feeders are believed making headway in garnering market share. The competition is producing record profits and at the same time, difficult projected breakeven into the future. This has continued for a while now with expectations that several yards will be running at a reduced rate that may or may not be sustainable until there is more inventory to work with. Price spreads between the various categories of animals, basis, inverted carry, and box price falling, are creating spread widths that make it more than difficult to offset the multiple factors of risk being assumed by cattle feeders. I emphasize the feed yard as it is believed they are the ones assuming the lion's share of risk. No doubt, all categories of inventory are at risk of potential adverse price fluctuation, but at any time they wish someone else to assume their risk, they can do so at even, if not premium to the index. Even though hindsight has been disappointing to look at, if having been hedged, the future is what is of concern, and there is no shortage of price to capture, or risk to mitigate.
The Elliott wave has unfolded several times within what is considered the major 5th wave that began at the September of '24 low. The first 5 wave sequence was believed to be the top in April, but when the correction took place, and new highs made, it forced a change to reflect another sequence higher. Repeat a second time to the high June and once it again it pointed towards a top. The subsequent high and low of June turned out to be another wave sequence, as new contract highs have been made again. I know that many are rolling their eyes back in their heads going, "not the 5th wave again", and "how many 5th waves can there be"? Very understandable, and might take another 5th of some kind to help get through this one. However, once again, with the new contract highs, it is believed at the very least another sequence is in the making that has great propensity to top, at seemingly the most bullish time frame ever, to date, in the cattle industry. How, is believed written above in that competition has driven the price high enough to ration the number of producers able to compete at current capital requirements of production. Even with cost of gains expected lower going forward, the need for an ever-increasing fat price continues to be a significant factor in projected returns. All of the above leads me to suggest that when assumption of risk is wished to be transferred, depending upon time frame, at the money puts are approximately 3.5% to 4% of the value of the contract. This suggests that to date, any marketing into the future of feeder cattle, or fats, can be done retaining 96.5% to $97% of today's value well into the future. While futures traders are leaning towards wanting to own feeder cattle risk at a premium, allow them to, as it is too your advantage, regardless of top or not. To cattle feeders, it's the best that can be done as futures are at contract highs and the basis haircut is there to contend with regardless.
Corn is in a bear market, but finding it difficult at the moment to keep pushing lower. Demand is good, but supplies appear bountiful. Soybeans continue to be front and center due to the shortage of acres, pollination mostly in August, and believed likelihood that the market will attempt to buy bean acres for '26. This has led me to recommend ownership of the $11.00 and $12.00 November soybean calls. This is a sales solicitation. Energy has consolidated significantly the past couple of weeks since the huge post Iran issues. Diesel fuel has already begun trading higher with crude and gasoline tagging behind. I anticipate energy to continue higher. Bonds are lower on the week after more inflation/stagflation data was released. As well, the sheer volatility created by the Presidents volatile tariff actions is believed causing many to make rash decisions based upon significant price fluctuations in very short periods of time.
Christopher B. Swift is commodity broker and consultant with Swift Trading Company in Nashville, TN. Mr. Swift authors the daily commentaries "mid day cattle comment" and "Shootin' the Bull" commentary found on his website @ www.shootinthebull.com.
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