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Sunday, Dec. 21, 2014

A Halloween Trick for the Eurocurrency

Posted Monday, November 7, 2011, at 12:57 PM

With a plot resembling a bad zombie picture, the European debt crisis was revived this week, causing the Euro currency to plunge as much as 5 cents, or more than 3%. Just as financial markets breathed a sigh of relief that Greek debt contagion worries had been slain by a $1.4 trillion bailout package approved by Eurozone leaders, news emerged that Greek Prime Minister Papandreou would put the bailout package to a vote before the Greek people. Horrified that a "no" vote could bring about the demise of the euro, investors dumped their Eurocurrency positions and bought the U.S. dollar.

By Friday morning it seemed that Greek leaders had decided to reverse course on the referendum, but spooked investors continued to hold onto their U.S. dollar positions. As of midday Friday, the December Eurocurrency contract was trading at $1.3750 down 4 cents (-2.8%) on the week.

MF Global Files Bankruptcy

The markets were shocked this week by the announced bankruptcy of a major commodities trading firm, MF Global. Under the leadership of former New Jersey governor John Corzine, MF Global purportedly made highly leveraged bets on the debt of European nations, which caused staggering losses. The firm is currently under investigation by a slew of regulators and has been prevented from initiating new trades, leaving thousands of clients stranded.

Cattle Charge to Record Highs

Shoppers buying beef this week groaned may have groaned upon hearing that live cattle prices hit a new all-time high on Friday morning, trading over $1.25 per pound. Prices have stampeded higher over the last six months as beef supplies have tightened amid strong U.S. and international demand.

The persistent drought in the Southern Plains has reduced pasture land across Texas, Oklahoma and Kansas, forcing cattlemen to move their herds prematurely into feedlots over the last few months. This created a temporary glut of slaughter-ready animals, but also drastically reduced the number of animals that would be available in the future. The potential for a shortage in the future has pushed prices for cattle next spring an additional 5% above the current record levels.

Our domestic cattle prices have also been supported by increasing demand from Asian nations. South Korea and Japan are both poised to increase in U.S. beef imports, prompting the USDA to project a record in beef exports for 2011.



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Commodity Futures File
Alex Breitinger
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Alex Breitinger, a 2009 graduate of DePauw University, is a commodity futures broker with Breitinger & Sons, LLC in Valparaiso. He can be reached at 800-411-FUTURES (3888) or online at www.indianafutures.com.
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