Call the Market

After the market's tremendous performance last month, last week's derailment has the cattle complex completely on edge and somewhat baffled as to what went wrong. Shouldn't there be some reason or rationale as to why the market has plummeted after traders and feedlot managers have diligently worked to advance the complex since early September? If you read my latest Sort and Cull blog (https://www.dtnpf.com/…), you'll be reminded that not every decision has to be made rationally, or even with sound logic.

Cassandra Fish, author of "The Beef" blog shared similar thoughts this week when she wrote, "Despite multiple other examples of similar market action in the past, every time the 'computers' take over and grab the market by the proverbial throat, folks that make their living in the cattle and beef industries are shocked and disillusioned. Feeder cattle futures nearly touched limit down, 1,075 points, and live cattle futures exceeded a 500-point drop. In four days, more than half of the two-month rally was erased in December LC. Open interest this morning declined only 100 contracts on the sell-off, yet volume was an active 92k contracts which suggests heavy day trading by someone or something. Analysts attempt to explain the sell-off with links back to the fundamentals. But there are countless examples when futures fall $10 or even $20/cwt below cash lows, when price discovery is in short supply. And it never seems to happen on rallies. The old blow off top common decades ago rarely if ever happens, the market tops nowadays in an orderly and benign manner. Not true on the breaks. Fear is the machines' friend."

Unfortunately, folks, that's where we and the cattle market sit today -- shocked and disillusioned. I wish I could tell you that the market's fundamentals will prevail this week and help push the market out of its funk, it's unlikely that the complex will see that level of support. On Tuesday, Nov. 3, some early trade was already noted in the fed cash cattle market at $340 in Nebraska. It's likely that the rest of the week's trade will follow suit and be lower, as it's never a good sign when cattle begin to trade that early in the week.

For the near term, this sideways to somewhat lower trend will likely remain the market's theme until something undeniably bullish arises (like another bullish Cattle on Feed report or a rally in the fed cash cattle market) and helps restore the market's confidence.

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

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