Black Swan Events Emerge More Often, Create Havoc
By Jeff Rose
Let’s take a look at cattle market fundamentals first, and it’s all good news. Cattle on feed numbers are down, the cow herd is shrinking while domestic and foreign demand are strong. Nothing but blue skies and higher markets on the horizon, right?
Sure if this was pre-BSE, which I will refer to as our first black swan event. The term black swan is used to describe a market disrupting event that is uncommon, or perhaps unheard of.
Well, we are currently waiting to see what will be at least our fourth black swan event in the past two years. They are becoming so commonplace that I sometimes lose perspective.
In fall of 2019, a Kansas meat processing plant fire took out a large chunk of the national kill capacity. And it occurred right as the fall price rally started.
And then in spring 2020, COVID-19 arrived just as we were recovering from the fire, but this black swan event continues to impact markets. Then, this summer, Russians hacked JBS and it shut down meat processing for a few days, just as things are getting back to a semblance of normalcy during a pandemic. The JBS hack was not that impactful, but our friends in the packing industry are adept at taking advantage of situations to benefit themselves.
Now, packers are falling on hard times lately, because margins have fallen to around $700.00 from earlier highs of more than $800.00. But the good news is, cash markets have trended positive over the summer and futures markets are at or near all-time highs. These counter-cyclical trends relate to my first sentence about fundamentals.
And now the COVID-19 variant emerges to impact markets. I am a member of the local school board, our plan for going back in the fall does not include mask or vaccine mandates. Call Nexus today 866.455.6553 before this most recent black swan development impacts you.
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