Over the years as we have covered various sectors — from energies to stocks and stock indexes to fixed income to forex; and different asset classes from futures to equities to exchanges traded funds — trading has grown more complex.
One area that always seemed simpler were the agricultural markets. Movement in the grain sector was largely driven by weather during the growing season. Every once in a while a trade embargo would create a spike and in the last decade or so China had to be considered and would often be a wild card, but it was pretty manageable if you knew the right people to talk to.
For the meats it was just a little more complex. Cattle and hogs were driven by the price of grain as well as the broader supply and demand factors in the economy. Adverse winter weather could put cattle in danger and force feedlots to reduce stock, which would affect future herds. But for the most part ag markets were easier to follow.
In “Cattle call” we learn that the live cattle market has gone through some significant changes and has grown to be more of an international market. The demand for meat by emerging and emerged economies continues to affect the supply demand dynamics as well as greater production in places like Brazil, Australia and China. We learned that even Water Buffalo production in India is affecting the price of beef on the global market.
Our old friend Tommy Crouch points out at that weakness in retail brought on by the Amazon (AMZN) revolution is a factor on the live cattle market because many of the popular mid-market steakhouses like Outback and Longhorn are located in shopping malls that are increasingly struggling to find shoppers.
That is highlighted in several features this issue. In “Ed Rensi talk business & burgers,” the former McDonald’s CEO discusses how the difficulty retail is facing is affecting the restaurant sector.
In “Technology is on the MENU” we breakdown the major players in the Restaurant Leaders exchange trade fund (MENU) and discuss what it will take to survive in the extremely competitive restaurant sector.
In looking at the sector we are hearing two divergent narratives: one that the industry faces major challenges and companies in the sector need to adapt or die and the other from major players who anticipate huge growth. In “Building efficiencies in research” we share data from research firm Sentieo that questions some of the highly optimistic growth expectations of companies in the sector.
The same thing that has happened in the retail sector appears to be happening in the restaurant industry. Turns out that millennials like taking meals at home. Those restaurant companies that are adapting technology to this environment are more likely to survive.
We hope this issue of Modern Trader leaves you with plenty of food for thought.