A longtime customer and close industry colleague, Hank Walton of Midwest Land & Cattle, sent the following letter to several industry publications. We present his thoughts on the current market situation:
The Great Cattle Plunder
Hank Walton, Midwest Land & Cattle Co.
The activities surrounding the Tyson packing house fire are disturbing to say the least. The cattle business, as we have known it, has become so radical one wonders about its survival. Sure, someone will graze or feed all of them but the question is who? No one can stand $80 per head swings in the feeder market in a week or, in fats for that matter.
People want to blame the packer, granted concentration is part of the problem but, we have the option to go spend 50 to 100 million to compete with them.
As I see it, the greed of the CME is the real culprit, they could care less what effect the computer and algorithm traders have on our business. Trading limits are structured strictly with the Funds in mind and, with complete disdain for the actual markets. The futures constantly keep the market in turmoil with moves that are in direct conflict with the fundamentals. I know that the big corporations need a risk management tool. I get it! Surely they are frustrated as well when the basis makes no sense. But, an individual that has 1 or 2 sales a year, with slim margins to start with, can’t stand the basis swings.
Our trade organizations make a big deal of rushing out to declare they are doing everything possible to lessen the impact of the Tyson fire but, without the futures it would have been a tragic event absorbed by the market, not a catastrophe.
My father used to say, before you “wa wa” about something have a solution but, I don’t!
Since I’ve put over 50 years into this business it really frustrates me to see it implode by outside influences, i.e. cattle futures. I’m also realistic enough to know that to try to delist the futures would be a fight with big money. Without a concentrated effort by many voices, we would not even get an audience.
I guess this is one of the few things that make me glad I’m in the 4th quarter.