Shootin' the Bull about rolling up put options

“Shootin’ The Bull”

End of Day Market Recap

by Christopher B. Swift

​3/20/2025

Live Cattle:

I recommend rolling up put options positions if applicable.  This is a sales solicitation.  While short calls may be a damper, the price difference from underlying futures, to a great deal of out of money puts, leads me to want to raise the minimum sale floor.  I recommend you calculate the current premium you have if a fence option spread with a long put and short call position and subtract the premium from the put strike to find where your minimum sale floor currently is.  Next, get the quote for the at the money put in the contract month you are delivering in and add that to the premium already paid, then subtract from the new higher put strike price to see if there is enough difference to justify spending more money to raise your minimum sale floor.  If you need help with this, call me. Cattle feeders can't catch a break at the moment.  There is a strong belief that farmer/feeders are the largest contributor to feeder cattle price due to a great need to market corn.  As well, cost of gain may differ greatly from a commercial yard to an under 1000 head yard. 

​

The next two steps of importance will be how traders react to the COF report on Monday, and marketing the price increase of beef to the consumer.  As most understand the reason for the large difference between the two years, and now 13 days in a row higher, how traders react will be important.  As box prices have risen sharply the past two weeks, these gains are starting to filter into retail meat counters and restaurants.  

​

Feeder Cattle:  

While extremely difficult to discuss, but it appears to me that since there is now pretty much equal beef production, and only a 1% decline in herd size last year, and not much taking place on the expansion side, it appears the market is no longer rationing cattle, but cattlemen.  No one wants to discuss not having enough of anything to go around, but that is what every cattleman tells me, there aren't any more cattle.  If that is the case, and a great belief that both production and processing capabilities expanded over the past 4 years, there is woefully too much production and processing capacity for the number of animals available.  Since expansion is expected to be painfully slow, there should not be much aspect for more cattle anytime soon.  Therefore, the higher price is believed rationing producers, not cattle.  

​

I had the pleasure of hosting a few spots on RFD-TV this morning with Tommy Grisafi one of my guest. A corn client of Tommy's asked: "is this cattle price the same as $8.00 corn?"  That took me back as I had not thought of it that way, but it seems very plausible.  Although feeder cattle only go out one year, the fat market goes out a year and 5 months.  The August of '26 fats closed today at $194.02.  Unlike the corn and beans, where sharp discounts were in the back months, in cattle, they are all within a few dollars of one another.  

How much higher can they go? As high as it takes until the ability to push the price on to the consumer in beef stops.     

Corn:

​Perspective plantings are coming on March 31.  Corn appears to be heavy on acres and beans lower.  However, price has been narrowing between the two.  I will tell you that I have an uneasy feeling about the grains on the near term for which leads me to anticipate a down turn.  Whether significant or not, I can't tell, but as we trade into next week, I may look for an opportunity to add to long positions were a decline to materialize.  

​

Energy/Bonds:

Energy is higher today.  I believe this higher trading to be a correction of the initial down move. Were energy to move lower, I would be looking to average down previous purchases of fuel and top off farm tanks. 

 “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.

​