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CME: Livestock and Grain Markets Rattled

by 5m Editor
7 October 2008, at 6:08pm

US - CME's Daily Livestock Report for 6th October 2008.

Livestock and grain markets were again rattled on Monday by the unprecedented unraveling of global equity markets. A tremendous amount of wealth is being destroyed around the world as investors seek to reduce their exposure to a potential global recession. Live and feeder cattle futures were limit down on Friday, while lean hog futures were also sharply lower but avoided a limit down close. The only contract trading higher on the day was the October lean hog futures contract which is scheduled to go off the board and thus is driven by the more immediate cash market.

Grain markets were also sharply lower with both corn and soybeans declining the daily permissible limit (30 and 70 cents, respectively). There was plenty of talk in the market about large players unwinding long positions in an effort to increase their liquidity. The appetite for risk is disappearing quickly as many investors are now clearly in survival mode, seeking to preserve enough capital to “fight another day.“ The Federal Reserve is currently considering an even more aggressive intervention in markets, possibly purchasing short term commercial debt. Furthermore, the FED has sharply increased the amount of funds available through its lending facilities while other world central banks have rushed to bring more liquidity to markets.

Unfortunately, these moves have so far been insufficient to stem the deterioration in confidence. Regardless of what economists think of the supply and demand fundamentals in the livestock and grain markets, there is little point to discussing “true“ price points when market participants are more concerned with their immediate survival. In the meantime, energy and feed prices continue to drop, which for some livestock producers may present good opportunities to hedge their feed needs. Difficult as it may be to focus on the tomorrow when today seems interminably long, people will still need to eat and business will go on. At least we hope so.

Further Reading

- You can view the full report by clicking here.

5m Editor