Today's U.S. Department of Agriculture (USDA) cattle-on-feed report reaffirms what the numbers have shown all along: that the fundamentals of the cattle business are very strong, with the cattle population down, cattle-on-feed down, exports growing and beef demand steady.
The perfect formula for a strong, profitable period in the livestock industry. Right?
Wrong. Outside forces, with little to do with the cattle business, are in control, and about all cattlemen can do is sit back and watch what they're doing to us. The sub-prime mortgage crisis has morphed into an international financial disaster, dragging the Dow Jones and the Stock Market down with it.
Financial markets are roiled by uncertainty and loss, and want everybody to feel their pain. This has spilled over into the commodities business, where the speculators on Chicago Mercantile Exchange and the Chicago Board of Trade have used the Stock Market crisis to drive futures up and down, to generate all kinds of trading commissions.
The cash market for commodities like cattle and beef, sound on fundamentals, follow the futures--skewing prices and markets in all kinds gyrations that defy basic supply and demand economic principles.
About cattlemen can do is try to hold as many head off the market as they can, until things stabilize and go back to being guided by the supply and demand realities instead of spill-over emotion and outside forces. Those who are forced to deal in the present market are getting a haircut.
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