(IARN) — “Coronavirus shook the world, (and) cattle futures took the brunt of it,” explains Jim McCormick, branch manager of Ag Market Net. McCormick further speaks to losses in cash and futures markets, as well as recovery efforts underway in cattle futures.
Food traders feared people would not go out to eat, amid public health concerns. Hence the aggressive selling of cattle futures. The collapse in cattle futures, however, was triggered by a culmination of events.
“Here’s what happened – As states have gone into lockdown, you had a run on the grocery store,” McCormick said. “People started aggressively buying meat. They (customers) clear the shelves. They (grocers) bring it in. They (customers) clear the shelves. Packers started making massive amounts of premium profit. Calculations late last week were almost up to $600 a head.”
“Late last week, Tyson came in, bid up, and gave an extra five-dollars on some of the cattle they bought previously, for last week,” McCormick said. “That has the industry thinking (that) these guys are going to try to get this cash market in line with the value of boxed beef. A lot of people are looking for the cash market to trade as high as 125 this week.”
However, futures were only trading up 106 at Tuesday’s open.
“A lot of that money that got chased bearishly into the cattle market a few ago is reversing now, trying to get out as fast as they can. That’s why we’re limit up again today, and may trade limit up a couple days as the future market tries to catch up with the cash market,” McCormick said.
McCormick senses cattle futures will “calm down” near-term.
“Demand for store bought meat is going to slow back down. That should bring this packer price back down, and we’ll come back into an equilibrium,” McCormick said. “If the markets are high enough, I would encourage producers to consider using options, protecting profit, if levels get back to profitable. We don’t know how long this virus is going to last and how long the lockdowns will be in effect.”
Story courtesy of the Iowa Agribusiness Radio Network.