“Shooting the Bull”
2025/12/01
Live cow:
Cash prices are likely stabilizing around $220.00, following last week’s trading trends. I anticipate that cash transactions will moderate over the coming year, as most holiday shopping is wrapped up, leaving consumers to influence retailer decisions. Futures traders might remain active, bouncing contracts back and forth but perhaps with movements confined to a narrower range. Currently, it looks like the cattle and futures markets have reached a low point. There’s an expectation for flat to slightly upward trends throughout the seasonal period from December to mid-February, focusing primarily on basis convergence. If a futures trader pushes contract prices too far from cash, they may adjust positions accordingly. So, it’s wise to expect notable volatility, even within a shrinking price range.
Feeder cattle:
For a brief moment, feeder cattle meant for January delivery could have fetched more than $5.00 over the CME index. This basis has been notably high, over $35.00 for several business days, which is quite unusual and likely won’t repeat soon. Hence, we’re expecting considerable volatility within a contracting price realm. According to Moore Research, trading activity typically rises from December 1 to mid-February, signaling that traders and cattle feeders might lower bids and offers, resulting in basis convergence happening in tighter price ranges than we’ve seen recently.
In the longer term, the significance of current trends might be reassessed, especially since the cattle population is not expected to grow. By spring, beef production and consumer demand could align closely, possibly limiting the expansion of the U.S. beef herd. Remember, if a producer has both Ferdinand and Bessie, that results in more cows. The increase in cattle numbers was a major contributor to market decline back in 2015. Expectations for increased cattle in 2026 appear minimal. It might take a while to anticipate significant market movements, leading to a prolonged period of sideways trading where producers can solidify their production strategies.
Corn:
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We’re advising a sell on soybeans and corn. Just to clarify, this is a sales pitch. Various reports indicate that there will be plenty of grains and oilseeds available through 2026, with new crop acreage in South America on the rise. Farmers’ ownership rights may be murky, and many seem eager to “re-own” their crops. In my view, the banks are the actual owners at this point. Whether you choose to go short or not, paying a forward premium to reclaim soybean crops after prices have risen by over $1 feels like a poor strategy. Right now, you could either hold off on trading or take profits on corn and beans from March to July, or consider an option strategy for selling the 2026 new crops. This marks a shift from my earlier thoughts, raising concerns about potential price increases. Demand seems heavily influenced by attempts to encourage China to purchase U.S. grains and oilseeds. Alongside lackluster government interest in renewables and supply issues, combined with rising production in South America, I don’t see much positivity. The concern may stem from funding that was perhaps anticipating more purchases from China, which now seems uncertain. The President might have aimed to encourage that, hoping to inject more liquidity into the market. Yet, corn prices have only gained around $0.30 to $0.40 from August lows. Beans have fared better, rising significantly since mid-October. So it seems like beans and meals have spiked, while oil has remained stagnant. Meanwhile, U.S. hog production is expected to hold steady until 2026, with slight declines in China due to efficient production techniques.
Soybeans and corn are crucial materials for renewable fuels in America. The crude oil market has faced challenges since 2022, hovering below $60—a critical support level. The President’s push for lower energy prices conflicts sharply with the need to promote U.S. grains. How can we lower energy costs without undercutting demand for renewable fuels? I’m not certain, but it doesn’t seem likely to boost optimism.
On a technical note, the soybean market might have experienced a false breakout from a long-term sideways trading range. The current rally could unfold in a five-wave pattern, which may or may not be completed. If it’s indeed a false breakout, new lows could be on the horizon. The corn market appears to be following a standard A, B, C zigzag pattern, indicating it’s time to assess positions accordingly. Presently, corn prices are quite low, suggesting it may become the more decisive factor sooner than beans. Should July corn surpass $4.70&1/4, it might indicate expectations for further price increases, but dropping below $4.48&1/4 could reinitiate the downward trend. There’s a slight head and shoulders pattern in beans, but I wouldn’t be surprised if they reach new highs. It’s worth considering these factors in your cash or futures positions, especially if this analysis holds true and anticipates new lows in both corn and beans. If prices increase, I suspect it will largely depend on potential Chinese purchases or South American weather issues—neither of which appears pressing at the moment.
Energy:
The energy market showed strength today. Oil appears to be relatively static, but if a peace agreement between Russia and Ukraine emerges, I would expect a notable price drop. Without such a deal, volatility similar to the past few weeks may continue.
Bonds:
Bonds have seen a significant decline. Japan’s bond prices have dropped sharply, resulting in steep interest rates for its citizens, which is causing headaches for countries holding high-priced, low-yield bonds. Japan is also a major holder of U.S. debt, second only to the U.S. government itself. Given the interconnected nature of global finance, issues within one nation can influence others. Our president has many tools at his disposal, yet he can’t dictate actions from foreign entities. Apparently, this situation might also be impacting the precarious world of Bitcoin derivatives. I haven’t personally seen them, nor have I owned any, and many people are investing in government-backed assets to hold things they may not fully understand. One commentator expressed concern that we could make dubious returns appear genuinely appealing, drawing individuals into risky investments—much like Bernie Madoff did. His schemes unraveled during the 2008 housing collapse. Now, with Japan facing challenges, unexpected vulnerabilities may surface in various markets.
“This is a solicitation or is in the nature of a solicitation.” Futures trading is not for everyone. Futures trading can involve significant risk of loss. Therefore, please consider carefully whether such trading is suitable for you, taking into account your own financial situation. Past performance is not indicative of future results and there is no guarantee that your trading experience will be similar to past performance.
