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Weekly Negotiated Cash Trade Nevil Speer

Relationship of cash trade and market trends

Cash trade for fed cattle has long been a concern. Here’s a look at the numbers.

One of the primary complaints contained within R-CALF’s lawsuit against the four major packers revolves around captive supplies and the declining level of cash trade establishing the weekly market. That is, R-CALF alleges the four major packers conspired to violate U.S. anti-trust laws in order to artificially depress prices paid to U.S. cattle producers. R-CALF further alleges that occurred through an organized reduction of cattle purchased in the weekly cash market.  

The cash market has long been an item of consternation for both R-CALF and the Organization for Competitive Markets (OCM). It’s a topic addressed previously by Industry At A Glance; there were three columns in a series highlighting cash trade and its relationship to volatility and basis.  

Meanwhile, this week’s graph approaches it from a different perspective, providing some historical context between the level of cash trade and the actual fed market, utilizing 26-week moving averages to avoid week-to-week noise. Keep in mind that R-CALF’s complaint asserts collusion began on Jan. 1, 2015 as denoted in the illustration.            

Nevil SpeerWeekly Negotiated Cash Trade

 

With that in mind, it’s important to note that fed prices peaked in mid-April, 2015 – the same time in which the level of cash trade was bottoming out around 20% of total volume. After that point, the proportion of cash trade began to turn gradually higher as the year progressed.  

However, most important is the time frame represented prior to 2015; cash trade steadily declined between 2006 and 2015 – all the while fed prices began to surge sharply higher in 2010.  The correlation between percent cash trade and the fed market during that time frame equals -0.80 (and it equals -0.37 between 2015 and 2018).

Speer serves as an industry consultant and is based in Bowling Green, Ky. Contact him at nevil.speer@turkeytrack.biz

TAGS: Outlook Prices
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