It Can Get Worse Before It Gets Better
April 14, 2020 08:20 AM
Bad news clouds the livestock market
There's a kink in the supply chain
Meats Market Update
Over the last few days, plant disruptions and a continuous flow of bad news have been weighing heavy on the livestock markets. With a kink in the supply chain, you can expect to see cutouts firm and cash cattle continue to drop, due to a continued demand for the finished product and a backlog in input supply.
As mentioned, multiple times over the last month+, this is a futures market. And we’ve been talking about the market pricing in these very disruptions we're now seeing. Take April Live Cattle futures contract as an example. We were trading as low as 91.075 on March 16, yesterday’s close was 91.00. Does that mean the market has priced everything in and the bottom is in? No, it can get worse before it gets better, but it does indicate the market has been doing fair job in pricing in these disruptions. Also, remember that just as the futures market tries to price in bad news prior to events, it also tries to price in good news. So, it's very possible that we see the market turn before all the bad news is in front of us. This whole cycle is where the saying, "Buy the rumor, sell the news,"comes from.
Today’s Daily Limits
Live Cattle: 4.50
Feeder Cattle: 6.75
Lean Hogs: 5.50
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