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October 2, 2025
Believe me…THE FACT THAT I HAVE BEEN WRONG ABOUT THIS
DOES NOT HAVE ANYTHING TO DO WITH WHAT COMES NEXT HERE.
Cattle DO look like they are DONE…
And on the cusp of…
Busting Wide Open on the Downside
“But Bill, there just aren’t any cattle!” That’s a quote
from a cattleman caller today…and I promise you, I have heard exactly that
phrase more times than I can count. In fact, the “smallest herd in 75
years” story that is accompanied by, “They CAN’T go down” is EVERYWHERE and
has spawned what I think is possibly THE single most “certain” countrywide
opinion I’ve heard in my 45 years around the markets. I mean, there IS a
virtually unanimous attitude that while prices obviously could back off
some, there is just no way that they could decline significantly…or weaken
for anything more than a few months. For my part however, and yes I have
been wrong, I maintain that the Cattle market, by next spring or summer
will have turned into an absolute disaster…and that, specifically, five
weeks ago Cattle made their FINAL HIGH and we are now entering a bear
market, which, if 50 years of history are any guide at all, will QUICKLY
turn into an avalanche of sellers, paired against what will basically be a
vacuum of buyers…with the end result being that both Feeder Cattle and Live
Cattle prices could drop by as much as 40% during the next 6-9 months.
MASSIVE ONE WAY OPINION DOES
CHANGE THE MARKETS
I do KNOW that the idea of, “prices will stay high for
the next few years,” IS one of the most unanimously held opinions I’ve ever
heard in the futures markets…And that unanimity extends to EVERYONE in the beef industry,
from both the supply side and the buy side, which, I can assure you, DOES
result in all of the cattle market participants making forward thinking
decisions, that DO, in the end, affect the way the markets WILL move:
1.
On the SUPPLY SIDE…When every
cattleman in the country is fully 100% roaring bullish, it does lead to
Feeder Cattle buyers being willing to buy steers AT ANY PRICE, however
insanely high they are, and even right now when they KNOW that Live Cattle
prices HAVE to make record highs next spring…or they stand to lose big
money on every load they own. Even so, at auction barns around the country,
they are still jam packed with buyers COMPETING TO LOAD UP on calves and
steers…again at any price.
2.
On the DEMAND SIDE…Right now, per
that same unanimously bullish opinion, consider the thinking/attitude of
the meat buyer for any business or entity that CONSUMES BEEF (like maybe a
major restaurant chain), and the fact this individual “knows” that waiting
to buy will only mean paying more for Beef in the future. What does he do?
And what does EVERYBODY else in the same position do? They BUY NOW and they
BUY AHEAD, whether it is through futures contracts, or forward contracts,
or however they do it. EVERYBODY THAT KNOWS THEY WILL NEED
THE PRODUCT IN THE FUTURE, AND “KNOWS” THAT WAITING WILL ONLY COST THEM
MONEY, GOES AHEAD AND GETS IT BOUGHT NOW.
And so…without just droning on and on, I’ll simply say: When the masses, on both sides of the equation, HAVE made
their respective moves, what you DO end up with (and this is the same
dynamic that you get at the actual top of any market), is a situation
where, as noted above, at some point, however bullish the “story” might be,
THE SCALE DOES TIP, and honestly, just overnight, for no apparent reason,
the markets begin to get a steady avalanche of sellers matched up against
what has become a vacuum of buyers…and relatively STRAIGHT, STRAIGHT DOWN
PRICES IS WHAT YOU THEN GET…IN BIG PERCENTAGES.
I say it’s coming…considering that the highs were made
over a month ago…that it’s here…and I THEREFORE REMAIN SHORT AND STRONGLY
RECOMMEND DOING ANYTHING YOU CAN TO GET SHORT HERE…N-O-W.
It should go without saying that I might still be
wrong…and if I am you could lose every dollar you invest…but I THINK WE ARE FINALLY THERE…AND THAT THIS COULD
GET SO, SO BIG ON THE DOWNSIDE.
How it works…How Live Cattle (cattle ready for
slaughter) declining in price can turn owning Feeders into a nightmare…
Here are two options I like…With today’s gap down and
lower close, a lower opening tomorrow is quite possible
and both of these options may be priced higher…I continue to recommend
owning puts in both markets…but there is nothing wrong with picking either
one. The Feeders are obviously more expensive but
they do move bigger.
And this is overkill…too much information…but the Futures Spread below
shows you just how totally, insanely out-of-whack, and SEVERELY OVERPRICED,
the Feeder Cattle market is relative to the Live Cattle contract...And
this DOES matter…As noted above, how much you pay for Feeders DOES make a
major difference with respect to profits and losses when you do reach the
point of selling those feedlot steers for slaughter.
I’ve included the chart following as I see it as having
tremendous profit potential…However, it can only be done as a futures
trade, which then does open the door for unlimited losses (as opposed to
buying puts or calls)…
I swear…No matter how many times I have called this
top…here at the most outrageous prices in history (I would compare them to
something like $5.00 gasoline), we DO have a lot of recent “evidence” that
the downturn has taken place…and I will remind you, for the 100th
time, that when it does turn, it typically is PRETTY DAMN NASTY ON THE
DOWNSIDE.
Get in touch in you want to get on…For my part, after a
LOT of pain, I STILL REMAIN ALL OVER THIS AND STILL SEE IT AS A MONSTER
TRADE. Doesn’t mean I’ll be right but that IS my continuing mentality.
Thanks if you read all this…
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: Live Cattle, Feeder Cattle
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