Why Do Cattle Futures Act So Bad?

Cattle Futures Unrelenting Sell-Off Continues

No comment. I plead the 5th. And I promise to never say that I reminded you guys dozens of times that you needed to have them hedged.

Actually, right now is a great time for a speculator to be selling short in the market–jtl

A Handbook for Ranch Managers By Cassie Fish, CassandraFish.com

Though it’s easy to blame the bearish cattle futures market action on the global economic concerns that have spilled over into the U.S. markets this week, those same concerns haven’t impacted all U.S. agricultural commodities equally this week.

Planned Grazing: A Study Guide and Reference Manual

In the midst of all the fear, Oct lean hog futures have posted an outside week and are trading higher on the week. That market is staring a huge supplies and a bearish seasonal, but it has rallied anyway. The corn market shook off the Monday sell-off, recovering 15 cents and is trading in a stable manner, refocused on dialing in new crop yields.

Cattle Futures Unrelenting Sell-Off Continues

Environmental & Natural Resource Economics: The Austrian ViewThe cattle market on the other hand can’t catch a bid. An early morning rally in live cattle futures quickly faded to another dollar down, with most active Oct LC taking out the February 2015 lows, now reaching levels not seen for that contract since May 2014. When the cattle market gapped higher back on June 6, 2014, it never looked back until this summer. But since then, all it’s done pretty much is look down. On a spot basis, there are a couple of sizeable gaps left on a daily continuation chart that Oct LC may yet fill.

The Nature of Markets

Combat Shooter's HandbookMarkets exploit vulnerabilities. Too much debt. Not enough equity. Too much infrastructure. A slowdown in demand. These are some of the factors plaguing Asia and specifically China and its suppliers like Australia for iron ore, Brazil for steel and Indonesia for mineral oil.

The Vulnerabilities Closer to Home

Reconnaissance Marine MCI 03.32f: Marine Corps Institute In the U.S. in 2014 end users scrambled to compensate in various ways for the shortage of domestic beef. By 2015, substitutes had been made, prices to consumers had been raised and the scramble ceased. The gouging the end user took in 2014 didn’t repeat in 2015.

The Betrayed: On Warriors, Cowboys and Other MisfitsOver the last 10 years, the U.S. beef packing industry has shuttered plant after plant, taking nearly 90,000 head of fed slaughter capacity out of the market. This segment of the business had entire years of red ink in the past decade. The result of these actions and disciplined moderation of kill levels is that in the midst of the tightest fed cattle supplies in modern history, packers could close out 2015 at a near breakeven after posting modest YTD profits in 2014.

The Essence of Liberty: Volume I: Liberty and History: The Rise and Fall of the Noble Experiment with Constitutionally Limited Government (Liberty and ... Limited Government) (Volume 1) Bring on the ethanol boom and extensive multi-year drought and the beef cowherd was liquidated to the lowest level since the tail end of the baby boomers were being born. Under pressure from high grain prices and too much feedyard capacity, feedyards began to close or be converted into dairy operations, especially in the Texas Panhandle and western Kansas, reducing some of the over-capacity in bunk space.

The Essence of Liberty: Volume II: The Economics of Liberty (Volume 2) With record profits 2014 it was the cattle feeders turn to chase diminished feeder cattle supplies for placement. The result was record high feeder cattle prices and record high breakevens. Futures have stubbornly traded discount to cash prices this year and offered limited to lousy risk management opportunities. Industry breakevens for the remainder of 2015 easily average in the mid-$160s. Oct and Dec LC futures now near life of contract lows, $20-25/cwt below most breakevens. It is this vulnerability that seems to be the markets primary focus.

The Essence of Liberty: Volume III: A Universal Philosophy of Political Economy (Liberty: A Universal Political Ethic) (Volume 3)If correct, then cash feeder cattle prices, limited supplies or no, could have the most downside going forward, as margin compression keeps moving downhill.

Copyright © 2015 The Beef Read. All rights reserved.
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.


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Planned Grazing: A Study Guide and Reference ManualPlanned Grazing: A Study Guide and Reference Manual. This is the ideal squeal to A Handbook for Ranch Managers.  Although the ecological principles remain the same, what was originally known as “The Savory Grazing Method” now answers to a multitude of different names: ranching for profit, holistic management, managed grazing, mob grazing, management intensive grazing, etc. Land & Livestock International, Inc. uses “Restoration Grazing” under its “Managing the Ranch as a Business” program.” No mater what you call it, this summary and synopsis will guide you step by step through the process and teach you how to use it as it was originally intended. No more excuses for failing to complete your grazing plans.

About Land & Livestock Interntional, Inc.

Land and Livestock International, Inc. is a leading agribusiness management firm providing a complete line of services to the range livestock industry. We believe that private property is the foundation of America. Private property and free markets go hand in hand—without property there is no freedom. We also believe that free markets, not government intervention, hold the key to natural resource conservation and environmental preservation. No government bureaucrat can (or will) understand and treat the land with as much respect as its owner. The bureaucrat simply does not have the same motives as does the owner of a capital interest in the property. Our specialty is the working livestock ranch simply because there are so many very good reasons for owning such a property. We provide educational, management and consulting services with a focus on ecologically and financially sustainable land management that will enhance natural processes (water and mineral cycles, energy flow and community dynamics) while enhancing profits and steadily building wealth.
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