Sort & Cull

Black Swans in the Market Place

ShayLe Stewart
By  ShayLe Stewart , DTN Livestock Analyst
A black swan is an event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict. The coronavirus and its impact on markets has become such an event. (DTN illustration by Nick Scalise)

There's no better way to describe the coronavirus and the impact it's had on the marketplace better than to describe it as a 'black swan.' According to New York University professor, Nassim Nicholas Taleb, "A Black Swan is an event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict. This type of event can be positive or negative, but deemed improbable, yet can cause massive consequences."

Massive consequences, extremely difficult to predict and deviates beyond what is normally expected, yes -- the coronavirus is a black swan. Regardless of what livestock contract you examine, the coronavirus has wreaked havoc over the entire complex and sent prices into utter shambles. Prices wrapped up 2019 and skipped into 2020 with a slow, modest, progressive beat. Since the middle of January prices have started to erode, slowly at times, and limit losses during others. Since Jan. 10, 2020 the April live cattle contract has lost roughly $17.27. During that same time period, the March feeder cattle contracts lost roughly $13.88.

In less than 60 days, cattle contracts lost significant position and although the markets closed higher at the beginning of this week, emotion, uncertainty and panic still have a tight grasp on the marketplace.

Listen to the Cattle Market News video on the DTN/Progressive Farmer Facebook Page to hear more about the market's current state and what producers may need to think about moving forward and managing black swan events in the marketplace. Click on the following link:

https://www.facebook.com/…

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

(ES/)

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