Another Black Swan Hits Cattle Markets

Another Black Swan Hits Cattle Markets

Fears over the coronavirus wiped out more than $3 trillion in the equities markets this week. Livestock and grain markets were hammered, too.

The coronavirus meltdown is the second black swan event for cattlemen in six months, but many fear this is worse than the Tyson packing plant fire. Worse because of the uncertainty. With the Tyson fire the industry knew the extent of the damage and had realistic ideas of how long the event would last.

With the coronavirus traders are uncertain of the damage or how long it will impact markets. And as we are reminded regularly, markets don’t like uncertainty.

CME Cattle futures extended the week’s losses as fears the coronavirus will hurt global growth and demand for beef. Volume on Thursday’s trade was the most in 13 months, suggesting new shorts as some contracts hit new lows.

April live cattle futures hit another contract low Friday and finished down $2.90 at $107.675. For the week, April live cattle lost a whopping $10.675. March feeder cattle futures hit a 5.5-month low Friday and finished the session down $1.30 at $131.275, and for the week fell $8.375. Both futures markets closed at technically bearish weekly and monthly low closes Friday.

The rout spilled into the cash trade, with fed cattle unusually active early in the week. Hedged sellers pushed sales early this week and volumes will be higher from last week. Monday saw cash cattle trades at $116, but by Thursday $115 was the norm, with a few cattle trading lower. Compared to last week that would be $3 to $4 lower.

Cattle sold in the North on a dressed basis at $185 to $187 which is $3 to $5 lower. Choice beef cutout closed $0.21 higher at $205.30, while Select was $2.79 lower at $198.91. The Choice-Select spread was $6.39.

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