According to AgResearch Pres. Dan Basse, Timing and Marketing is Everything in the Beef BusinessTue, 23 Oct 2018 11:48:17 CDT
At this summer’s Feeding Quality Forum in Sioux City, Iowa, market analyst Dan Basse talked about using the Live Cattle Futures Market as a tool to secure profits. According to him, markets will keep going up and down, so the trick will be picking the right time to buy or sell.
“We think that there is going to be a lot of volatility in the markets due to politics and economics, and really some of these issues with weather and grain crops,” Basse said, “so because of that volatility, farmers need to be focused on margin and rewarding the market when it comes around.”
To watch a short video-clip of Dan Basse, President of AgResearch Co., talking about market volatility and what that means for cattlemen, click or tap the PLAYBOX in the window below.
Some producers stay away from hedging in the Futures market because they see it as rigged.
“I think a lot of the misconceptions are that the markets are controlled. We don’t see the market as being controlled. We still believe that they are viable and reflect opportunities-we do however see the markets as having a bigger influence in terms of speculators than they had before,” he said. “If you look at percentage of speculative trade, we now know that about 80% of the agriculture market it’s done from a nonhuman basis. By that I am saying that a computer or machine is making the buy or selling decision. That gives us more volatility and more ups and downs that seem unnatural to the U.S, cattlemen.”
Basse sees continuing volatility into 2019, waiting on favorable export news to fuel a bullish cattle market.
“As of today, there’s not a demand driver in agriculture that is going to leap us into new opportunities going forward. In other words, a bull market,” Basse explained. “As we see it, there could be regional bull markets due to weather dislocations or something like that, but for overall beef, we are going to have these walls of cattle that come and go, which provide a wide swinging market over the next nine months, and in a general sense, we are hopeful that the Trump administration will get a trade deal with China. When that happens, then maybe we can get a demand bull market.”
Without that positive news on the world-trade front, the key to profits next spring will start with knowing the price required to make a profit.
“If you can figure out what your profitability is and where your margins are, there are going to be opportunities to make money. So, you have to take advantage of those when they happen. Our big concern in the cattle market is really going to be the period through April and June of next year, when cash cattle could get down below a dollar,” concluded Basse. “So, if you see rallies heading into the winter, whether they be political or weather aberrations, take advantage of them and make sure you get your hedges in place.”
While a trade deal with China would add bullish stability, cattlemen must navigate near-term volatility in the meantime.
Source - Certified Angus Beef
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