Regardless of futures’ dramatic discount to cash and a myriad of positive fundamentals discussed here and elsewhere, cattle futures seem to be of one mind only. Though a top was made in November, the fear faucet wasn’t turned on until December. Two months, a 14% correction later as thousands of contracts were liquidated, futures still can’t mount a decent rally.
Back in the day of the pit, folks used to put in their orders. Deck holder’s hands were stuffed as they sorted the deck, handing orders to the order fillers as the market moved. The market “went to the paper” in those days, chewing through price levels, occasionally hitting patches when orders were thin and prices surged or fell accordingly. There was a sense of fairness and order. Now we have the box. There is a reluctance to put in resting orders. Methodical price action has become the exception, not the rule. Volatility begets volatility. The more futures disconnect from the cash market, the louder the alarm bell rings.
There is a recurring concern the live cattle futures contract might be broken though no one has a clear idea on how to fix it, let alone if its fixable. The cattle Twitter chat uses the word “casino” to describe cattle futures trading on days like yesterday. These changes in market behavior have eroded confidence in the futures marketplace. Some might say these changes are part of our advancing society and nothing more and traders and the underlying beef and cattle markets simply must adapt. Others are seriously concerned.
In 2014, on the way up futures lagged behind the cash but the bull market in the real world prevailed. No premiums were priced in, no bullish exuberance, and no short-covering blow-off top ensued. It was almost as if the market was just holding its breath, waiting for a chance to go down. And now that the market has that bit in its mouth, it seems as if nothing will make it let go.
Cash Bids $160
Two major packers are bidding $160 and being passed. A few cattle traded that way. This news took Feb LC higher on the day and above yesterday’s high. But to spark a real rally, Feb needs to take out Monday’s high of $156 and never look back.
The Beef is published by Consolidated Beef Producers…for more info click here.
Disclaimer: The Beef, CBP nor Cassie Fish shall not be liable for decisions or actions taken based on the data/information/opinions.
A Handbook for Ranch Managers. In keeping with the “holistic” idea that the land, the livestock, the people and the money should be viewed as a single integrated whole: Part I deals with the management of the natural resources. Part II covers livestock production and Part III deals with the people and the money. Not only would this book make an excellent basic text for a university program in Ranch Management, no professional ranch manager’s reference bookshelf should be without it. It is a comprehensive reference manual for managing the working ranch. The information in the appendices and extensive bibliography alone is worth the price of the book.
You might be interested in this books supplement: Planned Grazing: A Study Guide and Reference Manual.