Beef Industry Experts Weigh In On Market Volatility IssuesWed, 04 May 2016 00:04:30 CDT
The volatility - and viability - of the live and feeder cattle futures markets continue to concern producers, and Colin Woodall, vice president of governmental affairs with National Cattlemen’s Beef Association, says his organization is actively involved in finding a solution. Early this year, NCBA sent a letter to the CME Group and has since instituted a working group with the company to address volatility in the cattle markets.
“This issue of market volatility, especially given where we have seen the markets go over the last eight to nine months, is extremely concerning,” he says.
Woodall says that despite outcries over erratic price movements without market news, the CME Group has not engaged to a satisfactory level for the cattle industry.
“We have not had enough response by CME to put some things in place that we feel would be able to help us,” he says. “Ultimately, they are going to have to take some pretty drastic action to ensure that we don’t just completely lose the futures contracts as an effective risk management tool.”
OSU Extension Livestock Marketing Specialist Dr. Derrell Peel recently weighed in on the volatility issue and analyzed the non fundamental nature of today's feeder cattle futures.
“Growing proportion of the outside (non-hedging) liquidity in feeder futures is, by many accounts, from sources motivated primarily by portfolio management rather than actually speculating based on feeder cattle market fundamentals,” Peel said. “Aided by computers and mechanical trading strategies, this type of activity tends to result in movements into and out of futures markets quickly and violently; resulting in increasing market volatility as underlying liquidity is exhausted. Often this type of trading includes broad-based commodity indexes of energy, precious metals and other commodities and of which feeder futures is a tiny proportion.”
Read Peel’s complete feeder cattle futures analysis here.
You can hear more about efforts to stabilize the CME futures markets during the latest edition of the Beef Buzz.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
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