Hurricane season has brought about some unintended
consequences which are my job to find as a commodity broker. The one least likely to make the news is their effect on hog and
cattle prices. Every time people are forced to flee and cities lose their
power, we see a rally in meat prices. Loss of power creates a temporary demand
shock to the system. Every individual and grocer has to trash every piece of
meat in their home or store.
This didn’t actually hit until the blackout in August of ’03.
I was prepared for the stock market’s initial sell off followed by a huge rebound
based on the public selling the market off on the terrorism fears and buying it
back with a vengeance when it was ruled out. That trade lasted from Sunday
night until Tuesday morning, just as I planned. However, over the next week and
a half, I watched the hog and cattle markets climb and climb. At that time, I
didn’t have the forethought to forecast the demand shock of the replacement
value of all of the perishable goods.
Hurricane Date Change Hogs Change Cattle
Floyd 9/16/99 11% 11%
Blackout 8/14/05 17% 28%
Isabel 9/18/03 19% 9%
Ivan 9/16/04 7.8% 2%
Dennis
& 8/05 4.5% 9%
Katrina
Rita 9/24/05 5% 3.5%
This morning’s trade will most likely, send all asset
classes lower. Obviously, this will include the commodity futures markets. Take
advantage of this morning’s weakness to establish long positions in perishable markets
.
