Stock Market Jitters Could Infect Cattle Prices

May 18, 2016 12:00 PM

Cattle prices are climbing higher, but producers should pay attention to jitters about the stock market, which might indicate a price decline is ahead, says Mark Gold, Top Third Ag Marketing.

“We saw the cash market on Thursday jump up to $132 to $136,” Gold tells “AgDay” host Clinton Griffiths on the Agribusiness Update segment for Wednesday, May 18, 2016. “The futures started to follow with it, and then the futures broke $2.50 out of nowhere. We’ve got a $10 to $12 discrepancy between the cash and the futures. Now it’s a long way until the end of June to get those to come together, but part of the problem I think is the stock market. People are very concerned about the stock market. As I’ve said a lot of times, if you want to know where the cattle market’s going to go, watch the stock market.”

Yet for now, cattle producers can have some confidence there’s price potential yet to be realized.

“We made a pretty good low in the cattle market when we should have, we’ve had a nice bounce here,” Gold explains. “Charts have been trying to fill some gaps back that were left on this initial rally. I still believe we can move it higher because you’ve got the cash market just too strong.”

Meanwhile, hog producers are enjoying favorable prices stemming from Chinese demand for pork. That means it’s time to ensure your marketing strategy is in place.

“We’ve run these prices up to $82 to $84,” Gold says. “Anytime we get it up to $88 or $89, in that range or even close to that, I think guys certainly need to be buying puts to go out into October, December, to protect the downside … . I don’t think the real demand is going to last much past the summer months, but it may be enough to have one more push of $5 to $7.”

Livestock producers might enjoy yet another price bump from grilling demand if the next few months prove to be hot and dry as some experts predict

 “If they’re right about a drought this summer, I think we could see some more demand,” Gold says. “But you have to be careful when you have good demand if the stock market falls out of bed. Then we’ve got a problem.”

Click the play button below to watch the complete “AgDay” interview with Gold.

Want more video news? Watch it on AgDay.
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