Call the Market

By now, I'm sure you've all seen that Tuesday was a painful day for the cattle complex. The feeder cattle contracts closed limit lower (down $9.25), and the live cattle contracts closed anywhere from $5 to $7 lower. And pinpointing the exact reason why the contracts broke lower remains troubling.

The market has been anxious, overall, as it's coming to terms with the fact that boxed beef prices will likely see a seasonal softening, as a post-Labor Day regression is normal. It's also likely that fed cash cattle prices could trade lower in the coming weeks, as packers were able to secure a sizeable commitment last week and continue to run slower chain speeds. Another factor is that President Donald Trump made a casual comment over the weekend that when his policies take effect, everything will be cheaper, including beef.

And if you take a closer look at the market's daily chart over the last 10 days, you can all but see the anxiousness building up. Throughout last week's trade, the October live cattle contracts traded faintly lower. But, come Tuesday, the market broke well out of its comfortable trading range and sank lower. Although we know that bull markets have bad days and that bull markets can even have lower-trending weeks or months, we still subconsciously act like Chicken Little, all but running around screaming, "The sky is falling! The sky is falling!" when the market stops, turns on its haunches and breaks lower.

Some of you may be quick to scoff and say, "Well, ShayLe, when you're paying upwards of $2,200 plus for feeder cattle, you're darn right a change in the market's cadence is going to raise some brows." I couldn't argue with you there. Any time there's a shift in the market, it's worthy of thought, consideration and some time spent reevaluating the marketplace. But we, as cattlemen, have a horrible track record of panicking and becoming unhinged when said changes develop, even though we know they're inevitable. That is the point of today's column: If we, as cattlemen, know that the market is subject to regular ebbs and flows, then why not better position ourselves so that we are less likely to react to the market's changeable nature emotionally?

Unfortunately, when you and I decided to jump into the cattle business, we subconsciously agreed to join up hand in hand with a market that's subject to more volatility and anxiousness than most. And in the past 10 years, the level of notable volatility that the cattle complex has seen has grown exponentially. Between larger daily trading limits, the increased interest of money-managed funds, and logarithmic trading that's entered the market, managing risk has become a side component of simply doing business. That is why I plead for you to set benchmarks within your business and this marketplace to help you better strategize when the market gets frantic and the voices of Chicken Little creep up.

As much as I wish it weren't so, the sheer fact remains that the cattle complex will continue to have to manage volatility. It's unhealthy for the marketplace and for us as individuals to become deranged every time a ripple in the market occurs.

So, please, I implore you, sit down and know your business. Look at what opportunities could lie ahead for you in this bullish marketplace and hone your marketing strategy. It's far too easy to see the market's historical prices and let the importance of strategically developing your marketing plan for the upcoming year(s) fall to the wayside. But by doing so, you're also expanding your own mind, which will make you less likely to frantically panic when the market does see some volatility.

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

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