PM Daily Market Commentary – 4/20/2016
Many years ago, an old cattle broker told me that any time you can control 30 to 35 % of the transactions at the auction mart, you can be pretty well assured of controlling the price, if you have the patience and watch the action carefully. Most of the cattle offered for sale on any given day are there to be sold and not purchased; therefore, the sellers will be price takers and not makers. This fellow had inside relationships with the owner of the auction mart and very few cattle ever left the stockyard.. Most were sold the next day. The first few lots through the chutes usually went at a discount, but prices slow rose through the day.
Every transaction came with a fee or commission. With the speed that high frequency traders move stocks and options through the financial markets, is it realistic to think there is NOT collusion amongst the major firms.
The really cool part of this scenario was that the cattle buyer was close to the Canadian-US border, so when the price was low, he'd move cattle to the country with the most favorable exchange rate. The beauty of PM's is that you don't have to feed them everyday. The cattle broker now lives in Costa Rico and is retired.