Shootin' The Bull

Written by Chris Winward

4-29-25

Cattle

New highs were made in all contract months in the fat market today.  The June contract is still under where April is going of the board by $6 and early-week cash trade is starting with 220 being passed on in Nebraska.  Last week's cash trade averaged 212-213 in the south and 215-218 in the north.  I'm hearing that sellers in the north are holding out for $225.  Further clarity on higher cash will develop later this week.  Boxes are continuing their climb with today's PM choice box print up another 5.49 at 348.26 on 108 loads.  Packers are limiting kill to support boxed beef prices.  Mexico responded to US Secretary of Agriculture Brooke Rollins' request to take further steps to stop the spread across the US border, thus eliminating the possibility of restricted cattle movement into the US in the coming days.  Feeders were still higher today after this news, all contracts posting $1-2 gains in the futures.  New contract highs were made pushing August futures to within $2.20 of the $300 level, which may have been eyeing and I think will be achieved this week..  July corn closed down 12 ½ cents and it's recent selloff will help improve margins for cattle feeders.

The supply side of the dynamics which lead to price discovery of feeders and fats lends to a strong case for why prices are moving higher at the moment.  Beef demand has proven resilient in the face of economic uncertainty.  The question that everyone is asking is how long can it continue?   Nobody wants to hedge too early, spend too much on puts or cap their top side on a runaway market, especially when you have to buy replacement inventory at higher prices.  I read today that an April survey from Lending Tree found that 25% of Americans are financing their grocery purchases with some form of buy now, pay later service.  Many are late on these payments and at high interest rates.  Restaurant foot traffic is down as well.  It's anybody's guess as to how long beef can remain at elevated levels and compete with cheaper protein options.  That being said, we are at contract highs and I think it is a great place to look at placing hedges.  One of the dangers of a slow and steady grind higher in any market is that participants become complacent in marketing and many do see a correction happening in the near future, and when it does happen, they think it will come back.  Sometimes it does, often it does not.  I'm not trying to spread fear here, but rather asking readers to be proactive in making these decisions.  If not here, then decide where or what price action will be needed to make that decision.  I mentioned a negative result of a slow, steady futures grind higher.  One of the positives is that it often results in lower volatility premiums of those put options.  Long put options are my preference in this situation in that it gives coverage by also flexibility depending on which way the market moves.  Get with your broker, understand the products and formulate a plan.  The CME had an education suite which is a great place to do some homework and brush up on the mechanics of the futures and options markets and the tools that they provide for risk management.  

Grains 

Grains were on the struggle bus today with July corn finishing down 12 ½ cents, July wheat down 6 ½ and July beans down 10.  Favorable US planting weather conditions, rain in Brazil and fund liquidation weighed on the entire complex.  The US dollar selloff has helped our export book and traders will be watching this Thursday's weekly exports for direction in the grain trade.  One factor weighing on the soybean market is China's signal that they do not need US beans and will be changing livestock feeding rations and sourcing purchases from South America to reduce dependency on US exports.  The majority of the US crop is not in the ground and we have an entire growing season ahead of us.  I expect volatility in the coming weeks.

On a side note, Microsoft, Apple, Facebook and Amazon are all reporting earnings over the next 2 days and will influence outside markets.  Those 4 companies represent 40 percent of the S&P total market cap.  

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