Livestock Futures Commentary
Outside markets puked lower to start the week, much of which was on the back of the fallout in the energy sector after Saudi Arabia announced steps towards an all-out price war against other oil-producing countries. This dropped energy stocks as much as 50% which led to credit/default risk concerns.
This was fuel to the fire in an already unstable outside market as the media continues to blast non-stop coronavirus headlines. I’m not suggesting coronavirus is a non-issue, because the market is telling us it is (partly because the markets may have been overextended as it is), but I want to share some numbers to keep things in perspective. “From April 12, 2009 to April 10, 2010, CDC estimated there were 60.8 million cases (range: 43.3-89.3 million), 274,304 hospitalizations (range: 195,086-402,719), and 12,469 deaths (range: 8868-18,306) in the United States due to the (H1N1)pdm09 virus.” Source: https://www.cdc.gov/flu/
Expect the volatility in the outside markets to continue to be the leader for cattle. Overtime, volatility will come back out and things will stabilize. When that happens, we think some of the best opportunities will be in cattle futures. We have been looking past the April contract and towards June, August, and October. With the volatility, technicals have been thrown out the window until things settle down and they re-calibrate. So, we will be working with clients to trade a core long position with an intermediate term time frame.
Amidst all the volatility, lean hogs have surprisingly been the one to remain range-bound. We think there may be some opportunity to the upside, but think it is likely limited and there are better opportunities elsewhere.
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