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February 27, 2026
My Opinion…
I believe the odds have
become tremendously higher that the INEVITABLE BEAR MARKET IN CATTLE has begun
a collapse that will take both Feeder Cattle and Live Cattle relatively
straight down, between 25-30% in price (at least), during the next 3-4 months.
The bottom line is that last fall’s final insane surge in
prices was a function of ultra bullish cattlemen, inspired by the industry wide
mantra, “smallest herd in 70 years!”, giddily paying ANY price to buy calves
and Feeders…EVEN when they knew those animals would lose them money ONLY if
Cattle prices kept soaring into even higher record levels in the months to
come…AND THEY HAVE NOT.
The bottom line is that all those stratospherically
expensive feeders bought last fall (and unquestionably already losing money)
will soon begin showing up for slaughter…with virtually everybody in the
business in the same overloaded, and underwater, cattle boat…with ALL OF THEM
HAVING TO SELL WHEN THEY REACH SLAUGHTER WEIGHT…NO MATTER WHAT THEY ARE
BRING…WITH THE RESULT QUITE POSSIBLY BEING AN ALMOST STRAIGHT DOWN MOVE IN
FEEDER AND LIVE CATTLE PRICES.
As I have frequently stated, there is no other commodity
market like the Cattle Complex…that the fact of these being LIVE ANIMALS, and
cannot be stored away (like grains, for example) when prices are low, almost
ROUTINELY does result in “falling knife” sort of action…where describing the
decline as “straight down” can almost be an understatement…And considering
the MANIA we have recently experienced in Cattle prices, I fully believe that
this same NASTY “straight down” scenario is what we’ll being seeing during the
next 2-4 months.
I’ve shown you these before, but
have another look at these 50 years of Feeder Cattle histories which are
EVIDENCE OF HOW FEEDERS DO GO DOWN…And
believe me, in EVERY one of these cases, some sort of bullish story was out
there at the market top…and then was kept alive ALL THE WAY DOWN…which is no
mystery. That’s how this GAME works.
These are “close only” charts…Note the percentage
size of the declines…and how long it took to do so…And ALSO that
in many cases, how often there are lengthy strings of lower closes with very
few upticks (higher closes).
From one day to next…and not necessarily due to any
particular news event…they just start rolling over, and from there, just keep
on going.
Why this
happens? Kind of the same way, over and over and over?
As I’ve also previously noted, what DOES happen when a bull
market in Feeders ends, what you typically you have are 1000’s of Feeder
owners…who, along with everybody else, have been buying hands over fists…again,
at ANY price…But then, as prices “surprisingly” (inevitably I’d say) begin to
weaken, ALL OF THOSE PEOPLE (unless they are 100% hedged…and very few ever are)
IMMEDIATELY BEGIN TO INCUR LOSSES…And the next thing you get, and this IS
normal human behavior, is all those former enthusiastic buyers beginning to sit
on their hands…which then evolves into what I’d call a “buyers vacuum,”…which,
with EVERYBODY already long, presents an equation, simplified, that is “ALL SELLERS
& NO BUYERS.” And when this scenario is playing out is when you get all
those 4-8 week 20% crashes.
The fact is, both Feeder Cattle and Live Cattle just closed
out February dead on their lows for the month…and in doing so, put in massive
Monthly Reversals Lower…when, all I heard ALL month was “bullish fundamentals”
and “bullish Cattle on Feed reports.” If you want to sit there and say, “So
what?”, go right ahead…But what I’ll say is, they DO turn somewhere, and you
can bet that they DO turn with no particular event or signal that tells you,
“Get short now!” They don’t. They just turn…and when they DO show some sign
that it’s happening, as I believe we’ve had, you don’t ask questions. You just
GET SHORT…and so long as it’s working, plan on staying that way.
Here are options I like at current levels…
FEEDER CATTLE
LIVE CATTLE
Call if you want to talk this and
the other markets I am recommending.
Thanks,
Bill
770-425-7241
866-578-1001
All
option prices in this newsletter include all fees and commissions. All charts,
unless otherwise noted, are by Aspen Graphics and CRB.
FUTURES
TRADING IS NOT FOR EVERYONE. THE RISK OF LOSS IN TRADING 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. THERE IS NO GUARANTEE YOUR TRADING EXPERIENCE WILL BE SIMILAR TO PAST
PERFORMANCE.
The author of this piece currently trades for his own
account and has a financial interest in the following derivative products
mentioned within: Feeder Cattle, Live Cattle