High Choice Feeders Blog

The Ag commodity markets have become to me much more perplexing in the last couple of months. I consider myself more of a technical trader than a fundamentalist, but I will admit that at the end of the day fundamentals will eventually rule. Technicals will determine the route in which we get there though. Fundamentals affecting the Ag Commodities have changed dramatically in recent years. Large fund driven companies can move markets all by themselves. I believe so much so that these funds are a Fundamental all to themselves!  That said, I believe if you’re participating in markets that I trade in specifically like live cattle feeder, cattle corn and wheat, your fundamental outlook has to be worldwide in scope.

A specific example of this is the corn market here in the last week of October. What is driving it?  Well none other than the European debt crisis. I see very little correlation between the two, but it is what it is so you have to respect it. The world has shrunk dramatically in the last few years, so that now what is happening around the world while you are asleep is having a financial impact on your business here at home! The opportunities, but also the risks, have never been greater.

Lately, the state of commodities seems to be mirroring the state of the rest of the world; namely incredibly volatile. The world and its happenings seem to affect just about everyone in some shape or form. I would submit the cattle markets are no exception.

The June 30 crop report provided some temporary relief for feed costs, but with the weekly December corn close on July 8, the relief could be short lived.

Many people are saying the need for risk management is stronger than ever. I would say that it depends largely on one’s risk tolerance. Risk management can curtail losses in volatile times, but unfortunately on the flip side it curtails profits as well. My personal bias.

Right now, there is more risk in the corn market than the fat cattle market.  With feeder cattle at contract highs, the need to be very careful with your purchases and feed needs is imperative.

For anybody involved in commodity markets, the last eighteen months have been a real whirlwind. The amount of money to be made or unfortunately lost is unprecedented. It really is a stark contrast to the meager returns offered by financial instruments (i.e. CD’s, treasury bills, money markets, etc.)  Right now, it’s a very exciting time to be involved in the business of cattle feeding. Agricultural commodities, specifically, have been affected by world circumstances never seen by anybody to date. We have a new middle class emerging in countries like China, India and South Korea that have upgraded their diet to include a much larger percentage of protein. This upgrade in diet can only come about with the importation of much larger quantities of meat from the U.S.
This has been a golden opportunity for people involved in beef production, specifically a company like ours, High Choice Feeders.

I’ve been engaged in the business of cattle feeding since 1985 and I’ve never been more optimistic about the future. Today is truly a global economy with huge opportunities for profit. I’ve heard a lot of lamenting lately over the high price of inputs and risk associated with doing business in this kind of environment. History has shown that over the years it is this kind of higher risk environment that produces the large profits we have seen in the last 18 months and hopefully well into the future!