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Cattle prices and stock market/ etfs

isu22andy

isu22andy

Active Member
Sep 17, 2012
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While the stock market is still open , what do you stock gurus thinking about buying a cattle ETF like COW , it's at a one year low and looks like a 5 year low as well . When the blood runs in the street your supposed to get greedy right ? What's cause them to hammer the cattle markets lately ?
 
The saying of be greedy when others are fearful, be fearful when others are greedy is appropriate. However, that is usually applies to stocks, where companies can change operations/management to better their stock price

I am not sure if that is the case in commodities because there are many factors to take in to consideration that is not concentrated to one individual/company.
 
isu22andy said:
While the stock market is still open , what do you stock gurus thinking about buying a cattle ETF like COW , it's at a one year low and looks like a 5 year low as well . When the blood runs in the street your supposed to get greedy right ? What's cause them to hammer the cattle markets lately ?
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#'s are fairly high right now. Lots of product. Finally bounced way back up from the South Dakota Blizzard and the Southwest floods.
 
Cattle market is strange and illiquid. I'd stay away unless you really know the market. A computer program that I'm sort of used to in other markets doesn't look pretty. Never know where the bottom will be.
 
isu22andy said:
While the stock market is still open , what do you stock gurus thinking about buying a cattle ETF like COW , it's at a one year low and looks like a 5 year low as well . When the blood runs in the street your supposed to get greedy right ? What's cause them to hammer the cattle markets lately ?
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Cattle was in one of their longest contractions ever up til a year or two ago. Couple that with high feed prices 2-5 years ago and it was far from profitable. Corn has sunk to its lowest lows of the current price range and held for a bit. The cattle price got way over bought for way too long. It had to come down.

While I have no idea what will happen with cattle, it's like trying to hook up with that old flame a couple weeks after she separates from her husband. You may have a little or a lot of fun, but you may also get your rear handed to you. IMO, if you want a little safer situation, let it have 3-6 months to sort things out first.
 
isu22andy said:
While the stock market is still open , what do you stock gurus thinking about buying a cattle ETF like COW , it's at a one year low and looks like a 5 year low as well . When the blood runs in the street your supposed to get greedy right ? What's cause them to hammer the cattle markets lately ?
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Also, if you can't answer that last question to a general knowledgable degree, it means, don't mess with it.
 
I know nothing about cattle markets but "5 year low" always is a buy signal for me.

edit: went and looked at it. Not priced well for me I'd let that thing sink lower if I HAD to play it.
 
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If your going to invest in the cattle market, I suggest you let HRC investment trust do it for you, she has had success in the cattle market.
 
I have about 110 head you can buy if you want to get into cattle. High prices with the bottom falling out of feeders caused them to fed cattle longer causing more meat on the market. That with the Texas drought being over and them getting their numbers back up has caused the market to be flooded and fall. It will be a tough market for the next couple years.
 
I have a few thousand in LAND which buys non-row crop farms. I had about $3k in COW but sold last year. I realized owning the underlying asset is a better long-term play than straight commodities.
 
I don't think it would be the worst thing in the world to jump in right now, but I also think there will be more selling over the next few months. Hog prices are going to drive this thing lower for the next couple months, IMO. The hog industry has major trouble on the horizon with more fat hogs than packing capacity through the end of the year. I can see a 1998-ish scenario playing out with this and spillover selling negatively impacting the cattle markets.

Cattle markets are bearish in and of themselves with higher cattle on feed #s, carcass weights, and cold storage inventory, and the hog market is terribly negative right now - I don't like the combination.
 
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This is kind of off topic but could someone explain to me how corn\bean\cattle\hogs pricing and buying\selling works in No0b terms? I'm not looking to invest in corn or beans or cattle or hogs but i'd like to have a better understanding of it when they rattle off the information on 1040 am in the mornings.
 
Gunnerclone said:
This is kind of off topic but could someone explain to me how corn\bean\cattle\hogs pricing and buying\selling works in No0b terms? I'm not looking to invest in corn or beans or cattle or hogs but i'd like to have a better understanding of it when they rattle off the information on 1040 am in the mornings.
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The five year old explanation is: Just like any market the higher a price on something is the more people enter the market to capitalize on it. Eventually there are too many producers and inventory exceeds demand, meaning prices go lower. When prices go lower those who entered the market last generally lose money and so they offer their goods for even lower prices to get at least a little of their expense back. It's a cycle.

With farm commodities there are also political factors like what countries import the goods (increasing demand), ban the import of goods (lowers demand), government subsidies, weather, etc.
 
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Gunnerclone said:
This is kind of off topic but could someone explain to me how corn\bean\cattle\hogs pricing and buying\selling works in No0b terms? I'm not looking to invest in corn or beans or cattle or hogs but i'd like to have a better understanding of it when they rattle off the information on 1040 am in the mornings.
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Kind of a loaded question but I will give it my best shot.

Futures prices are determined on the Chicago Board of Trade and Chicago Mercantile Exchange. Crop and livestock producers / crop and livestock buyers buy and sell contracts of the commodities through the exchange. Local prices are determined by local market factors. The difference between the local price at the elevator and the price on the board of trade is called basis. Basis is impacted by local supply/demand factors, access to export markets, local end users, etc.

I can get into more detail if you want but it's hard to know where to start and stop. Iowa State has one of the best marketing professors/extension agents in the country IMO in Chad Hart. He teaches a marketing class at ISU that's really good - lecture notes are in powerpoint presentations on this page if you or anyone is interested in learning more:

:http://www2.econ.iastate.edu/faculty/hart/Classes/econ337/Spring2016/index.htm
 
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farminclone said:
Kind of a loaded question but I will give it my best shot.

Futures prices are determined on the Chicago Board of Trade and Chicago Mercantile Exchange. Crop and livestock producers / crop and livestock buyers buy and sell contracts of the commodities through the exchange. Local prices are determined by local market factors. The difference between the local price at the elevator and the price on the board of trade is called basis. Basis is impacted by local supply/demand factors, access to export markets, local end users, etc.

I can get into more detail if you want but it's hard to know where to start and stop. Iowa State has one of the best marketing professors/extension agents in the country IMO in Chad Hart. He teaches a marketing class at ISU that's really good - lecture notes are in powerpoint presentations on this page if you or anyone is interested in learning more:

:http://www2.econ.iastate.edu/faculty/hart/Classes/econ337/Spring2016/index.htm
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So do like individual farmers working say 50 or 100 acres that they own playing the markets with their own crops on a daily basis? Or are they selling to an "agent" or middle man for lack of a better term so they don't have to deal with the board & exchange?
 
Gunnerclone said:
So do like individual farmers working say 50 or 100 acres that they own playing the markets with their own crops on a daily basis? Or are they selling to an "agent" or middle man for lack of a better term so they don't have to deal with the board & exchange?
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Not on a daily basis, especially for a smaller operator. Someone like that is likely just making simple cash sales to the local elevator. The local cash sale price generally follows the Chicago Board of Trade price, but can be different based on local market factors. For example, if the country as a whole has really good crops that will drive the price of corn down the board of trade, due to higher supply. But if a local area has a short crop due to a natural disaster, the price of cash corn at the local market there may be higher to compensate for the local short supply.

Larger operators are more likely to manage risk actually selling/buying contracts on the board of trade. For corn, 1 contract is 5,000 bushels. If a farmer wants to leave his actual delivery options open as far as where he sells the corn locally, they can sell contracts of corn on the board of trade, which locks in their price on the board of trade, but doesn't lock in a local price. This allows them to take advantage of a hot local market and have flexibility where they actual sell and deliver the corn to.

Farmers that use the board of trade to manage risk typically do that through a broker .
 
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