What other markets could potentially trade negative.

[Gambitman]

So this crude going negative has really caused me to ponder what other markets could trade negative and what trading strategies would it affect.

For example we could have a meat shortage yet all the packing plants closed because of Covid and it is not inconceivable to me that live Cattle could trade negative.

Feeder Cattle I don’t think so as they are cash settled and small enough that they can be put in a feedlot for 100 days or so.

I assume all the grains could be stored on farm or at elevators.

I don’t know anything about the specs for deliveries for things like cocoa and coffee, but I assume that the commercial users have storage.

I have always used 0, especially on lower priced commodities like sugar as a risk control measure, but seeing what can now happen makes me nervous.

 

[xandman]

Yields

 

[Girija]

Jumping into etf when it trades less than its asset value

 

[schizo]

So this crude going negative has really caused me to ponder what other markets could trade negative and what trading strategies would it affect.

For example we could have a meat shortage yet all the packing plants closed because of Covid and it is not inconceivable to me that live Cattle could trade negative.

Feeder Cattle I don’t think so as they are cash settled and small enough that they can be put in a feedlot for 100 days or so.

I assume all the grains could be stored on farm or at elevators.

I don’t know anything about the specs for deliveries for things like cocoa and coffee, but I assume that the commercial users have storage.

I have always used 0, especially on lower priced commodities like sugar as a risk control measure, but seeing what can now happen makes me nervous.

Currently, CME is allowing negative prices for the NYMEX energy products only. These are CL (crude oil future), RBOB (gasoline) and HO (heating oil). That list could possibly extend into other markets in the future. Who knows?

However, keep in mind that there are commodity ETFs like USO that closely track the underlying futures. Nobody knows at this point in time what could hold in store for USO should June contract trade below 0.

 

[schizo]

So this crude going negative has really caused me to ponder what other markets could trade negative and what trading strategies would it affect.

For example we could have a meat shortage yet all the packing plants closed because of Covid and it is not inconceivable to me that live Cattle could trade negative.

Feeder Cattle I don’t think so as they are cash settled and small enough that they can be put in a feedlot for 100 days or so.

I assume all the grains could be stored on farm or at elevators.

I don’t know anything about the specs for deliveries for things like cocoa and coffee, but I assume that the commercial users have storage.

I have always used 0, especially on lower priced commodities like sugar as a risk control measure, but seeing what can now happen makes me nervous.

Dude, you have that backward. When you have a SHORTAGE, price usually RISE.

Only reason the oil is trading below zero is because of excess, not shortage.

 

[Metamega]

Dude, you have that backward. When you have a SHORTAGE, price usually RISE.

Only reason the oil is trading below zero is because of excess, not shortage.

Think he meant shortage of processing. If the slaughterhouses are closed someone has to keep those cows fed and watered. Cost grow so could end up just paying for someone to take. However could just put them down. Issue with oil is you can’t just close the wells down and you can’t just poor it into the ocean.

Chickens would just die after certain size. Our breeds we use after about 10 weeks are so heavy they can’t walk and just start dying. Huge waste but doubt you’d pay to get rid of.

 

[schizo]

Think he meant shortage of processing. If the slaughterhouses are closed someone has to keep those cows fed and watered. Cost grow so could end up just paying for someone to take. However could just put them down. Issue with oil is you can’t just close the wells down and you can’t just poor it into the ocean.

Chickens would just die after certain size. Our breeds we use after about 10 weeks are so heavy they can’t walk and just start dying. Huge waste but doubt you’d pay to get rid of.

Thanks for the clarification. But that would still imply shortage not excess. If there aren't enough to process the chickens, hogs, etc, it would create a scarcity. Scarcity leads to less supply, and less supply means higher prices for the consumer.

But with crude oil, it was not scarcity but excess that led to its plunge. There aren't any storage left to store all the glut. Cushing is completely full. All the oil tankers are taken. Why would the oil producers wanna pay you $35 per barrel (that's right, they're willing to pay you for buying from them)? That's how dire the situation is at the moment.

 

[Gambitman]

Yes I am talking about processor shortage. A live cattle contract is for fat cattle. Feeding fats is pretty much an exact science where a calf is pushed on feed (Corn or barley) until they reach the optimal weight and condition for slaughter. You don't just keep feeding them at least not at enormous cost and loss of quality. I can easily forsee a situation where the slaughter plants are closed and there is no beef on the shelves, but at the same time futures are negative because there is no place to go with the cattle. Probably chicken little on my part, but these are strange times.

 

[Overnight]

Yes I am talking about processor shortage. A live cattle contract is for fat cattle. Feeding fats is pretty much an exact science where a calf is pushed on feed (Corn or barley) until they reach the optimal weight and condition for slaughter. You don't just keep feeding them at least not at enormous cost and loss of quality. I can easily forsee a situation where the slaughter plants are closed and there is no beef on the shelves, but at the same time futures are negative because there is no place to go with the cattle. Probably chicken little on my part, but these are strange times.

People can live without needing gasoline for a while, but they cannot live without meat and their by-products for, like, ever. Meats will never ever go negative.