Cattle & Ranch Report

Heritage insurance is proud to partner with Chris Swift of Swift Trading company and author of shootinthebull.  This partnership will allow us to distribute his market commentary to our cattle and ranchers via text.  Eash day we will send out a text of his for insight into the cattle trading.

Here is the first commentary.


May 1, 2024


Live Cattle:

Many will continue to blame the bird flu for any price decline of cattle.  I think it is as simple as loss of profitability.  With a nonexistent margin, the price of fed cattle must go up, as most, if not all, due to procurement of feeder cattle at such a premium. So, under this fundamental factor, were the price to stagnate, the producer will lose at least the negative margin they created upon entry, or worse, the price goes down and increases the negative margin.  If, and only if the price goes up, does the cattle feeder stand a chance for profitability.

Consumers are talking with their pocketbooks.  Yum brands, Kraft/Hienz, and McDonalds this week posted news of weakening sales. The GDP was missed by a mile last week and today, crude oil traded under $80.00, suggesting the formation of a trend lower. Diesel fuel resumed its down trend and gasoline is believed to have peaked at the end of last week.  The consumer is expected to continue to shift in discretionary spending, and most likely not to take a more aggressive stance.


Feeder Cattle:

It is at the price level of the feeder cattle where the negative margin begins. Procuring inventory at a negative production margin offers only one way to profit from, that being, the price must move higher.  Feed costs are expected to subside, but not by enough to overcome the enormous price of feeder cattle. Note that feeder cattle today are only $7.10 from all time historic high via the feeder cattle index.  Beef production, for which the loss of was the catalyst for spiking feeder cattle prices higher, turned the corner this week and is believed to show a 1.6% increase in y/y beef production.  Futures traders are still willing to offer some premium, but that has been fleeting as well.  I continue to believe the fundamentals suggest further triangulation of prices as more discovery is being made on how much beef we can produce and import that will offset the loss of beef cattle.




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