Comments from the cow side on the trade war...

Discussion in 'Commodity Futures' started by Overnight, May 13, 2019.

  1. dozu888


    some interesting thoughts.. although..

    1) co2 is a hoax... but it's a separate topic;
    2) it's really difficult to change the way agro is run... too many votes depend on this thing.. ridiculous now that we are the number 1 producer of oil, but we are still putting corn alcohol in cars, with close to zero net energy gain, massive waste of subsidies, not to mention all the harm the alcohol does to engines.. sigh..
    #11     May 14, 2019
  2. Overnight


    I believe the idea behind the ethanol blend thing is that while it produces a bit less power, it produces CO2 that is reclaimed by the crops to grow said corn in the first place. It all seems a fuzzy science.
    #12     May 14, 2019
  3. dozu888


    very fuzzy...

    - nature can't selectively only reclaim the co2 from alcohol instead of oil lol;
    - initially this sort of started as part of the 'energy independence' thing, and perhaps a 'renewable' thing... the problem is it wasn't a legit 'independence' option to start with.. close to zero net energy gain taking into consideration the energy required to produce the alcohol... so now this has become a massive subsidy program tied to the Iowa votes (and the first stop of the presidential campaigns lol)... it's like paying massive dollars to people to dig a hole in the ground then fill it up.. complete waste.
    - then afterwards frac'ing and horizontal drilling etc developed and all of a sudden the US becomes the number 1 oil producer... but this corn program, it's such a monster now nobody can touch it.
    #13     May 14, 2019
  4. Cuddles


    It's supposed to be carbon neutral, since the co2 produced on ignition would be reclaimed by the crops. Compared to conventional oil, which is stored carbon from millions of years and nothing is being planted to reclaim that co2.

    The reality is quite different since ethanol production is rather energy intensive, and the push is economic more than anything.
    #14     May 14, 2019
  5. dozu888


    first of all, co2 is hoax; I have made many posts about the 2-inch man-made co2;
    secondly, carbon neutral is garbage in garbage out; human co2 is only 2% of all the co2.. a few acres of Iowa corn won't move the needle on that at all.

    bottom line is this corn thing like all the renewable programs is all about federal subsidies.
    #15     May 14, 2019
  6. JSOP


    The way that agriculture is run should've been changed long time ago. How long has the government been subsidizing the agricultural industry wasting taxpayers' money especially with the technology that increases agricultural production again and again and again leading to overproduction that drives the price lower and lower? All those because the agricultural industry is too stubborn to change and their lobby group being too strong, dictating their agenda over the interests of everybody. In this world everybody needs to change to adapt to evolve. Now it's the agriculture industry's turn. The tariffs is a good thing and hopefully it will effect some changes that's long time coming.
    #16     May 14, 2019
    dozu888 and Stockolio like this.
  7. Overnight


    Some more interesting bits from this week's cow summary.

    "Pork continues to soar in price. The NY Times had a feature article on the implications of African Swine Fever on U.S. pork and beef prices. The lean hog futures were higher each day last week. On top of this news, Mexico just eliminated tariffs on pork imported from the U.S. as part of the negotiations announced Friday on steel tariffs.

    Beef also received some favorable news with Japan eliminating the under 30 month rule for imported American beef. The U.S. still is penalized with tariffs in Japan far in excess of taxes on imported beef from other competitive suppliers.

    Corn prices have staged a rally of almost 40 cents a bushel and the rally continued this morning. This move has been driven by government help on the price and late plantings that will undoubtedly impact the yield. Stocks remain high but usage also is high with large numbers of cattle, hogs and chickens consuming record amounts of grain..."

    Hey, you in my PM, you know who you are...Didn't we discuss this like two weeks ago, about how it seemed lean hogs would be jumping in price due to the fever? We should listen to our instincts. :-\




    Two factors influenced the cattle markets at week's end. Sellers ceased jumping on any bid from packers and many were content to hold cattle into next week rather than continue selling lower. This resulted in the smallest purchases by packers in many weeks. Convergence of futures and cash in the period leading up to the delivery month will close the large gap.

    In the futures market the long side liquidation mode seemed to come to an end. Futures posted back to back gains late last week after a long period of daily declines. Technical traders who have participated in the downward spiral seem prepared to wait for signals from the fundamental side of the business. Some pointed to the late week strength in the box prices as signs the demand size of the beef business is healthy and thriving.

    Picking market highs and lows is always difficult business and too many factors feed into the fundamental supply/demand equation to find simple answers. Analyst already had picked 4 different highs beginning in February finding each guess to be wrong. Most analyst now are foreseeing a market working lower into the fall when many speculate the numbers of cattle offered for sale from the nation's feedlots will overwhelm the slaughter capacity.

    Many of these forecasts are based on April placements that some have suggested might be 25% over last year. We will find out this coming Friday when the monthly COF report is released. One aspect of cattle placements that is being ignored in this scenario is the fact April is not a large placement month and whatever number is reported, it only pales in comparison with May placements. Evidence is accumulating showing May placements to be under prior year due to the many weather disruptions.

    The stage is set for a surprise on this fall's price level. Little weight is given to the possibility American beef might benefit from world red meat realignment as African Swine Fever takes a toll on world supplies. This balance will be felt around the world regardless of our trade status with China. There has been little revealed regarding the Trump administrations "help for American farmers" harmed by the trade wars. As will always be the case, the verdict is out for future price levels and forecasts will continue to be updated as more information is introduced."

    I love this stuff. It seems an early roadmap to future price movement...Would just take years of study and pattern following to get it right.
    Last edited: May 20, 2019
    #17     May 20, 2019
  8. Overnight


    I suspect a live cow pop on this coming Monday, May 10th, now that Trump has tweeted his shit. Here's the summary from this past Monday, May 3rd. My how things change...


    Day to day changes in market prices is a fact of life in the beef business. In the best of times, those changes are critical to survival, and in the worst of times, can be terminal for some operations on the wrong side of the market. Frustrating to all participants are outside news events that roil the markets and leave participants feeling like puppets in a stage show. Too many times of recent, those events roil the market creating material harm to the value of inventories of cattle. Dealing with the daily fundamentals of supply/demand, drought, consumer attitudes, and operational cost is a handful but layered on top of that reality, the minute to minute announcements and tweets, is too much for any sense of peace of mind.

    The administration is in pre-election mode and posturing for trade deals and immigration change, is part of the strategy for rallying the vote. The fall out of these announcements and tweets does little to mollify the offended parties in the ag sector with poorly defined promises of income replacement. Exactly who will qualify for economic harm and how it will be tested is unclear. Will fully hedged operations receive payments? What about partially hedged operators? Is there a per head or per hundred weight subsidy for beef producers in mind? Designing a restitution plan is probably more difficult than negotiating a trade agreement. One thing history has proven – the government never gets it right.

    It seems obvious, from the rhetoric on both sides of the U.S./China trade war, that negotiations may go on for a long time in various forms. The problem with the current stance is once trade parties are forced to re-channel supply chain arrangements, new relationships are formed, and old ones forgotten. Establishing new trade partners requires burdensome paperwork, transportation and financing documentation to open the flow of goods and services. New communication channels are opened for the new relationships giving way to new order flow and delivery logistics. It is not always easy to toggle back to the old arrangements. China will have a large requirement for red meat imports in the near future and leaving out the U.S. meat producers will be a significant harm to future U.S. beef prices.

    The newly announced Mexican tariffs that will graduate from 5% to 25% over a time defined period is crazy. This action threatens the entire Mexican/Canadian trade agreement recently negotiated and will have a severe impact on our largest trade partners for U.S. beef. The President took this action over the advice of all his trade advisors giving little thought to the logical implications. This action will likely be reversed in the coming week but in the meantime, the markets crash.

    President Trump is too quick to act and tweet policy changes without consideration of the consequences. This results in confusion leaving the affected parties guessing about the impacts of the various policies. If the impacts are too severe then the President simple tweets another change, and the process repeats itself. Making a determination, about the consequences of an action, is rocket science and requires careful vetting.

    The livestock markets need stability and reliance on the old standards of fundamental supply and demand. We need to expand our export markets, build the ID systems to accomplish this goal, and re-establish our position as the premium meat producing country in the world.

    Living day to day on the latest trade news tweet is wrongheaded.


    And those cow guys saw the underlined, bolded bit coming. Fascinating.
    #18     Jun 7, 2019
  9. Overnight


    More cow news. Fun reads.


    "The premiums built into both pork and cattle futures from lost pork production due to African Swine Fever has disappeared for the most part. Meanwhile the disease continues to spread and accelerate. Vietnam like China is a large pork producer. Many of the pork products move both legally and illegally into China and ASF is now killing millions of pigs in Vietnam. In the early stages of the disease, pork liquidation causes plentiful pork supplies and then a gap of pork shortages. This in turn has pressured the cash markets around the world for pork NOW. The second half of this year should see tables change for pork supplies.

    Cattle Futures. The live cattle futures were hammered with the low August contract nearing $100. The speculative longs have left the market. "


    The advent of plant based proteins has arrived like a Tsunami. The press coverage has been unrelenting and favorable. The introduction onto food service menus has been rapid. Most restaurants have either posted an addition to their menus or promise to soon. The exception is Shake Shack that has refused to add a alternative meat product. The media is full of stories of problems keeping sufficient inventory on hand. Consumers are reminded of the self serving assertion that the product is helping save the planet from global warming partially caused by the livestock industry.

    The business side also has been a boon to investors. Beyond Meat's stock went public at $25 and is trading currently at $150 after having reached $200. The business stories are daily and also favorable suggesting a new disruptive business model. Beyond Meat and Impossible Foods are the leaders but giant Tyson has now joined the fray promising new meat alternatives in the future. Most supermarkets are adding plant based proteins to their inventories.

    The beef industry has met the onslaught with complaints about "Fake Meat". The attacks have focused on labeling, hoping once people realize the new products are not real meat, they will go away. They are dead wrong. The beef industry was outraged when the burger shops introduced a chicken burger. The chicken burger remains today. The food outlets will offer whatever they can sell and bad mouthing the competition is a failed strategy.

    Alternative meats, both plant based and cell based, are here to stay and the beef industry needs to compete by offering a better product at a better price. The industry also needs to educate consumers on the role of beef animals on the planet and in the diet.

    The nutritional value of beef is superior to those offered by alternative plant based proteins. The body doesn't store protein so it is necessary to replenish it daily through diet. When eaten proteins break down into amino acids that are used for almost every metabolic process in the body. The proteins source matters because animal proteins provide more balanced amino acids than plant based proteins that sometimes have low levels of certain amino acids and sometimes not all the nutrients provided by animal based proteins -- especially red meat. For example plant based proteins are low in methionine, tryptophan, lycine and isoleucine. Amino acids are classified as essential and non-essential. Animal proteins, because they resemble your body more closely, deliver essential amino acids. Animal proteins also tend to be high in other nutrients often not as prevalant in plant based proteins. Those include Vitamin B-12, Vitamin D, Omega 3s, Meme-Iron, and Zinc.

    Price will always play an important role in consumer choices. Currently plant proteins cost more than a beef burger. That may change as competition develops in this space. Beef will always need to compete for price but it also can compete by providing the information about the product that is honest and tells the factual story of beef and how the nation's grasslands are converted by ruminants to protein. Beef is an energy dense food that is known as brain food. The supply chain data desired by consumers must be provided through animal identification.

    The bottom line message to consumers is the value of a balanced diet. Veggie burgers have been around a long time. You can soak two pieces of bread in butter and put almost anything in-between and the result will deliver a satisfactory taste.
    #19     Jun 23, 2019
  10. maxinger


    Live cattle LE -
    price has been dropping from 124 in Apr 19 to 102 (due to trade war, virus, weather, fake meat or whatever).

    past few weeks, day range has been quite healthy.
    price movement still not that trendy. So I wouldn't day trade.
    I will continue to put the chart in my archive workspace.

    Perhaps there are other more workable trading strategy to trade LE.
    #20     Jun 23, 2019