Traverse City Record-Eagle

Business

July 12, 2014

Futures File: Cattle market slaughtered

TRAVERSE CITY — After reaching an all-time high early Monday morning, cattle prices reversed sharply lower as ranchers started bringing cattle to the market to capture record high prices.

Meanwhile, traders cashed in on huge profits after riding the market higher for months. As prices dropped, ranchers and traders seemed to succumb to herd behavior, with aggressive selling leading to even more selling.

During the week, prices fell so fast that the Chicago Mercantile Exchange’s limits were triggered multiple times, which prevent prices from dropping more than three cents per day. By Friday, the bloodbath seemed to be slowing down, but left the markets severely wounded, with fat cattle having shed more than nine cents per pound and feeders losing nearly twelve cents, finishing near $1.47 and $2.08, respectively.

The bright side of this price drop is for consumers, grocery stores, and restaurants, who may benefit from cheaper beef.

Grains get the guillotine

Midday Friday, the USDA raised its projections for coming grain surpluses, showing swelling supplies of corn, wheat, and soybeans. Boosted by prospects for extremely large crops this year and tepid demand that will be unable to eat into the supplies, US grain stockpiles could reach the highest level in years.

Going into the report, corn, wheat, and soybean prices were already significantly depressed, and prices sliced lower yet in the wake of the report. By midday Friday, December corn crumbled to $3.84, December wheat withered to $5.52, and November soybeans sank to $10.75 per bushel. Prices for this year’s crops are now at the lowest level since 2010.

Without a major shift in demand or threat to the growing crops, lower prices may become the norm, which would be a disappointment for US farmers and a welcome relief for end users after recent years’ record high prices.

Gold bulls awake from hibernation

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