Lee Pitts: That was quick
September 1, 2016
The good times in the cattle business sure didn't last long, did they? Oh well, it was fun while it lasted. And we'll always have those little reminders of what a decent market felt like: your 2015 pickup, $10,000 range bulls, $22,000 geldings, pallets of new barbed wire, stacks of cedar posts and bundles of tee posts you bought because your accountant said you needed some expenses. Now you can't afford to fill up the truck with diesel or justify the added cost of an extra hand to put up the new fence.
You'll hear economists say the fall in prices was due to imports, exports, reports, more cows, fewer feedlots, global warming and cheap chicken but I'm here to tell you it was all caused by a little Algebra.
I have a friend who last year about this time owned 10,000 head of cattle. This, despite never having ridden a horse, put out a single block of salt, or fed one flake of hay. He wouldn't know the difference between a Hereford and a heifer. A year ago this button-down city slicker was wearing Wranglers, ostrich cowboy boots, Stetson and a paisley shirt with pearl snaps. All of a sudden he was a cattleman, although he technically didn't own a ranch or have any cattle. He owned futures contracts in which he promised to sell cattle he never had. Now he's back to wearing flip flops and shorts. He lost so much money he became a vegan because he became allergic to anything even a little cowy. Now he's selling wheat he never grew.
I asked my neighbor how he got slaughtered along with the cattle he never owned and he said, "Lee, the futures market reminds me about the time I went whale watching. There were 50 of us on the boat and when someone yelled "whale," everyone would run to that side of the boat. Then someone on the other side would spot one and we'd all run to that side of the boat, nearly capsizing the vessel. Well, the good ship 'Fat Cattle' sank."
The cattle market got so high because investors thought cattle would go up and it's gone so low because the herd changed its collective mind and decided it was headed south. The problem is those buyers and sellers are using complicated computer algorithims that digest the data and trade contracts in mili-seconds. Once all the computers made up their mind to short the market there was nothing to stop the slide. And the traders can't make any money if the market's isn't moving.
It would be one thing if the traders played in their own New York City sandbox but the prices established in the futures markets are used in the formulas in determining whether your wife has to get yet another job in town. Until now, no one knew those Algebraic equations but thanks to some brilliant undercover work by yours truly, I'm now able to share the trader's secret sauce.
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Price equals the number of times you've made love in a manure spreader + number of county employees it takes to fill a pothole + number of Supreme Court Justices awake at any one time (4) + number of Wranglers in a crew cab pickup full of PRCA cowboys (12) + number of weeks it's been since you last changed the room deodorizer in the outhouse + number of hours in the past 24 your trucker has slept (4) + number of fat cattle sold on Tuesday (0) + number of empty Copenhagen containers in the glove box of your truck + number of weaned steer calves it takes to buy a new pickup (65) + number of honest politicians in Congress (0) – number of beers in a twelve pack (trick question) 12 – number of months since the frilly curtains in your bunkhouse have been washed (0, there are no frilly curtains in your typical bunkhouse) + number of times you took your wife out to dinner so far this year, excluding fast food (0) – number of chicken breasts in a bucket of KFC. The price for your calves will be this number times the futures price for October fat cattle divided by the number of functioning teats on a 30 year old West Texas Corriente cow (1).