Skip to comments.Beef Futures Plummet in Mad Cow Aftermath
Posted on 12/29/2003 2:19:14 PM PST by Indy Pendance
CHICAGO (AP) -- Beef futures fell the maximum amount allowed on the Chicago Mercantile Exchange on Monday for the third straight trading session since the emergence of the first U.S. case of mad cow disease.
But even with mad cow fallout continuing, major hamburger chains maintained their sales hadn't been noticeably hurt.
The report last Tuesday that a cow in Washington state was tentatively diagnosed with mad cow disease already had prompted the Chicago Merc to increase the limit on daily trading movement to 3 cents per contract, up from the usual 1.5 cents, last Friday and to 5 cents on Monday.
With a ban on U.S. beef imports by more than two dozen nations still in place, near-term cattle futures all fell to the new limit Monday. Live cattle for delivery in February - the current benchmark contract - fell 5 cents to 81.17 cents a pound.
Concerned about the impending expiration of the December contract on Wednesday, the exchange took emergency action for a second time to raise the daily trading limit for that contract on Tuesday. The Merc said that if the contract again falls the 5-cent limit Tuesday morning and stays there for an hour, an additional 2.5 cents would be allowed for a maximum fall for the trading day of 7.5 cents.
"It was just exhausting in the pit today," said Phil Stanley, independent floor-based analyst and trader. "Things appear to have sorted themselves out in this country, but now everyone has to wait to see what will happen overseas with our export markets."
There were signs that U.S. investors and beef-eaters were not panicking, with major hamburger chains saying their weekend sales were strong and had not been hurt by mad cow.
Shares in McDonald's Corp., which had fallen 5 percent last Wednesday after the first mad-cow report, climbed for a second straight session and finished up 51 cents at $24.60. Wendy's rose 56 cents to $38.55, and Outback Steakhouse jumped $1.78, or 4 percent, to $44.50.
Futures prices, however, reflect the continuing overseas bans on U.S. beef. The United States exports nearly $2.5 billion of beef to its three biggest markets - Japan, Mexico and South Korea, all of which are temporarily prohibiting U.S. beef imports.
It IS, however, time to write the February 60 and 62 put options, whose IV is up around 84% -- it's like stealing money, but entirely legal. Suggest you check out www.marketforum.com for some very informed (but, sadly, also quite a few very UNinformed) views on this topic.
Not yet..........prices have not dropped appreciably yet.
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