|
|
|
Volatility continues to be the rule rather than the exception in virtually all commodity markets, and ag is no exception. The past two weeks have seen wide, and sometimes wild, swings in market prices of the various common ag products, but in some cases the overall price levels have changed little in that time period. Take, for example, January Feeder Cattle futures. Two weeks ago, on Tuesday, Oct. 18,, the January contract closed at $147.30. Over the next two weeks a high of $148.70 was reached, and a low of $143.35 was touched today, on Tuesday, Nov. 1. But today’s close was $147.50, within 20 cents of where we started two weeks ago.
Those sorts of actions have become more the norm than the traditional way of trading, which was to identify a trend and ride it. Today’s trend may be tomorrow’s spike top, followed by a spike bottom next week. And while that kind of volatility certainly offers opportunities to those with the temperament and bank account to take on huge amounts of risk, it makes it much more difficult for the producer of corn or cattle to manage his risk. But, there seems to be little that we as producers can do to bring the futures markets back to what they were originally intended to be, a place where producers and end-users of commodities could let a willing third party take on part of their price risk. So we have to be even more vigilant and concentrated on the markets that affect our livelihoods, so we can embrace the opportunities to lock in profits or lay-off risk during the oftentimes brief window when those opportunities present themselves.
Now that I have that off my chest, let’s talk about what has happened the past two weeks in the ag markets. On Friday, Oct. 21, USDA released the Oct. 1 Cattle on Feed report, with generally bearish undertones to the results. As usual the main culprit was in placement of feeder cattle in feedlots during September. That number was essentially the same as September of 2010, while pre-report estimates were expecting a decrease of nearly 4 percent. However, the placements were heavily skewed towards lightweight cattle, many of which would have been on wheat pasture in a more normal weather year. That may help spread out the marketing of those cattle as fats and avoid a glut of slaughter-ready steers at any one time. But, combined with the moves in the financial markets, it was enough to cause Live Cattle futures to close lower for the two week time span. The December contract was down $1.72 in two weeks, while the February was down $1.47 and April dropped 45 cents. Cash fed cattle prices have strengthened, with the bulk of feedlot trade last week near $121 and some indications of even stronger values this week. However, boxed-beef cutouts are slow to respond, with Choice up just $2.61 in two weeks, while the Select gained $3.53.
Feeder Cattle prices bounced around, as mentioned earlier, with the USDA report, grain prices, fed cattle values and the European debt crisis all contributing to the volatility. In the end, for the two weeks ended Tuesday, the November futures contract lost 55 cents, with the January up 20 and March up 70 cents. Cash feeder auctions were also mixed, with a bit of an uptrend noted in yearling weight cattle, while calf prices were all over the board.
Lean Hog futures were lower, with the December contract down $3.40 and February off $3.42, thanks mostly to a higher dollar making exports more expensive. Cash butchers in Red Oak were at $61 on Tuesday, down just a half-buck in two weeks.
Soybean values took a major beatdown, with the November futures contract off almost 59 cents in two weeks, while the January dropped nearly 54 cents and March lost more than 50. A softening Chinese economy and the stronger dollar were the main culprits in the price slide, with the strong dollar being propelled by the on again/off again machinations of Greece and the rest of the European economy.
Corn values were firmer after two weeks, with thoughts that the domestic crop may be smaller than currently predicted. The December contract was up more than a dime, with the March up more than 12 cents and May up almost 12.
Wheat prices were firmer, as poor domestic production prospects won out over the stronger dollar. In Chicago, the December futures contract was up almost a nickel in the past two weeks, while the May contract gained nearly a dime. In Kansas City, December picked up seven cents, while March was up more than 8 and May was up almost a dime.
Next Wednesday, Nov. 9, USDA releases the monthly Crop Production and Supply and Demand reports. Changes in expected production will likely get the most attention. In the meantime, the usual suspects of weather and outside markets will help direct the gyrations of the markets.
Volatility continues to be the rule rather than the exception in virtually all commodity markets, and ag is no exception. The past two weeks have seen wide, and sometimes wild, swings in market prices of the various common ag products, but in some cases the overall price levels have changed little in that time period. Take, for example, January Feeder Cattle futures. Two weeks ago, on Tuesday, Oct. 18,, the January contract closed at $147.30. Over the next two weeks a high of $148.70 was reached, and a low of $143.35 was touched today, on Tuesday, Nov. 1. But today’s close was $147.50, within 20 cents of where we started two weeks ago.
Those sorts of actions have become more the norm than the traditional way of trading, which was to identify a trend and ride it. Today’s trend may be tomorrow’s spike top, followed by a spike bottom next week. And while that kind of volatility certainly offers opportunities to those with the temperament and bank account to take on huge amounts of risk, it makes it much more difficult for the producer of corn or cattle to manage his risk. But, there seems to be little that we as producers can do to bring the futures markets back to what they were originally intended to be, a place where producers and end-users of commodities could let a willing third party take on part of their price risk. So we have to be even more vigilant and concentrated on the markets that affect our livelihoods, so we can embrace the opportunities to lock in profits or lay-off risk during the oftentimes brief window when those opportunities present themselves.
Now that I have that off my chest, let’s talk about what has happened the past two weeks in the ag markets. On Friday, Oct. 21, USDA released the Oct. 1 Cattle on Feed report, with generally bearish undertones to the results. As usual the main culprit was in placement of feeder cattle in feedlots during September. That number was essentially the same as September of 2010, while pre-report estimates were expecting a decrease of nearly 4 percent. However, the placements were heavily skewed towards lightweight cattle, many of which would have been on wheat pasture in a more normal weather year. That may help spread out the marketing of those cattle as fats and avoid a glut of slaughter-ready steers at any one time. But, combined with the moves in the financial markets, it was enough to cause Live Cattle futures to close lower for the two week time span. The December contract was down $1.72 in two weeks, while the February was down $1.47 and April dropped 45 cents. Cash fed cattle prices have strengthened, with the bulk of feedlot trade last week near $121 and some indications of even stronger values this week. However, boxed-beef cutouts are slow to respond, with Choice up just $2.61 in two weeks, while the Select gained $3.53.
Feeder Cattle prices bounced around, as mentioned earlier, with the USDA report, grain prices, fed cattle values and the European debt crisis all contributing to the volatility. In the end, for the two weeks ended Tuesday, the November futures contract lost 55 cents, with the January up 20 and March up 70 cents. Cash feeder auctions were also mixed, with a bit of an uptrend noted in yearling weight cattle, while calf prices were all over the board.
Lean Hog futures were lower, with the December contract down $3.40 and February off $3.42, thanks mostly to a higher dollar making exports more expensive. Cash butchers in Red Oak were at $61 on Tuesday, down just a half-buck in two weeks.
Soybean values took a major beatdown, with the November futures contract off almost 59 cents in two weeks, while the January dropped nearly 54 cents and March lost more than 50. A softening Chinese economy and the stronger dollar were the main culprits in the price slide, with the strong dollar being propelled by the on again/off again machinations of Greece and the rest of the European economy.
Corn values were firmer after two weeks, with thoughts that the domestic crop may be smaller than currently predicted. The December contract was up more than a dime, with the March up more than 12 cents and May up almost 12.
Wheat prices were firmer, as poor domestic production prospects won out over the stronger dollar. In Chicago, the December futures contract was up almost a nickel in the past two weeks, while the May contract gained nearly a dime. In Kansas City, December picked up seven cents, while March was up more than 8 and May was up almost a dime.
Next Wednesday, Nov. 9, USDA releases the monthly Crop Production and Supply and Demand reports. Changes in expected production will likely get the most attention. In the meantime, the usual suspects of weather and outside markets will help direct the gyrations of the markets.
