Agricultural News
No Easy Answers or Simple Solutions to the Convergence Crisis in Cattle Markets
Fri, 30 Sep 2016 12:43:37 CDT
It is no secret what's going on in the cattle markets right now; live cattle futures trade seems to be having a hard time matching up with cash cattle trade. This match up, or "convergence," as it's called, according to OSU's Dr. Derrell Peel, is simply just not happening. Farm Director Ron Hays went to Dr. Peel to find out why.
"I think we have a couple of different issues that interact with each other," Peel said. "One is sort of the inherent volatility that we have seen in the futures side in both feeder cattle and live cattle contracts. Related but separate from that issue, especially on live cattle markets, is the question of price discovery and the thinness and potential impacts of thinning markets in terms of establishing a cash market level which you can tie to those futures contracts."
A lot of issues at play with no easy or obvious answers, says Dr. Peel. Before any radical moves are made, such as abolishing formula based pricing, he insists the industry must be really careful in investigating and understanding why those things have evolved the way in which they have. He says there are reasons as to why the market works the way it does and in this case, you would not want to throw the baby out with the bathwater in trying to fix it, lest even greater problems arise in its wake.
"I think it's not a simple easy answer but I do think we want to proceed pretty carefully in terms of allowing this industry to find ways to do business that are best for the industry," Peel said, "not only on an individual level but also for the benefit of the industry more broadly."
Listen to Dr. Derrell Peel visit with Farm Director Ron Hays about what could be causing a lack of convergence in the cattle markets and how the industry should approach fixing it on today's 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.
WebReadyTM Powered by WireReady® NSI
Top Agricultural News
More Headlines...
