Watch out--cattle prices in hands of futures traders

This blogger is not a big fan of cattle futures contracts traded on the Chicago Mercantile Exchange. This is where the Big Boys play, and the poor average wretch trying to eke out a living in the cattle business doesn't stand a chance.

You see, any of the Big Three meat packers, or a couple of the huge cattle feeding firms in the Texas Panhandle can afford to buy enough cattle contracts on the Merc at any one time to virtually corner the market. Traders on the Merc are more than happy to accomodate them, because they make commissions on each contract they trade for a customer. They don't care if the market goes up or down, but its the volatility that makes contracts buy and sell--so that's what they're after.

So it is today, and June live cattle contracts on the Merc are trading at a higher price than fed cattle currently are in the cash market. Either the so-called "fund" buyers will buy enough contracts to drive cash prices up to meet the current June futures price. Or, of course, they can sell enough to drive futures down to the current cash price--or lower.

It is really out of the hands of the average Joe who owns cattle. He only stands to make or lose money, based on what other people decide to do between now and the June contract expiration on June 30. Undoubtedly, there are many cattle owners, with cattle in a feedyard, in various stages of being ready to sell to a packer, wringing their hands, waiting for the Big Boys to decide their fate.

Congress is nibbling around the edges of the Commodity Futures Trading Commission, the toothless "regulatory body" of futures trading, primarily due to high food prices and the role futures trading in corn at the Chicago Board of Trade has had in jacking up corn to almost $7 a bushel.

Most people can tell them without an expensive study: it's ethanol, the energy-wasting, non-solution to our nation's energy crisis. It takes more fuel and water to raise the corn and then process it into ethanol, than the resulting fuel that comes out--and it gets poorer mileage than straight gasoline to boot. Even worse, it's the competition between the heavily federally subsidized ethanol producers and livestock feeders for the corn--that's why its $7 a bushel.

Question answered. No charge.