Sort & Cull

We like to think that everything in the world operates by sound logic, and that all decisions are justified - - especially those that are tied to our money. But the truth is, traders can send the market higher, they can send the market lower, and they don't have to abide by any rhyme, reason or logic at all.

Which personally is what I believe happened last week. The live cattle contracts deteriorated enormously for virtually no reason, no reason at all. And the board's chaotic behavior deteriorated all the confidence that the fed cash cattle market hoped to have and consequently pushed both Southern live cattle and Northern dressed cattle to both trade lower.

To recap the specifics, last week October live cattle fell $5.88 lower throughout the week, December live cattle fell $10.18 throughout the week, November feeder cattle dropped $10.55 lower throughout the week and January feeder cattle fell $13.58 throughout the week's time. And the fed cash cattle market traded lower too as Southern live cattle were mostly marked at $224, which is $3.00 lower than the previous week's weighted average, but the Northern dressed cattle traded anywhere from $348 to $365, which was $13.00 lower than the previous week's weighted average.

Which raises the question: why is the market 'allowed' to operate that way? How can traders pull the market $10.00 lower in a matter of a week's time, erasing the modest rally in which the market had worked to accomplish over the last two months?

I don't have all the answers to life's problems, but I personally believe that if the market didn't have such wide daily trading limits, some of the market's danger would be lessened. And while yes, the market has the ability to trade higher or lower at the same daily trading limits, you and I both know the downside is always more reactive and far more costly.

It's tough saying what this week's trade will do with the utter havoc that wrecked the market's confidence last week. But I can promise you one thing, at the rate in which we saw the contracts fall, we won't likely see the contracts rally at the same speed.

ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com

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