Varilek’s Cattle Call: Contract Highs
It was nice to see the cash continue the slow grind higher. Meat bids were from $178-$180 and live prices as high as $114. Yields on cattle have been exceptionally good for this time of year. Cattle have had nice weather with clean yards to provide some yields over 64%. Daily gains remained better than expected on closeouts to start the year with the carcass weights staying large and well ahead of year ago levels. Steer carcasses were 25 pounds bigger than a year ago for the week ending 1/23/21.
The February live cattle contract will be under delivery starting Monday. It is carrying a premium to cash with a close at $116.725. The delivery system catches plenty of flack, but it is a market that remains tied to the actual commodity. Having the ability to deliver is something I do not want to see change as a beef producer. The hog market is based on a cash price that is decided by a minute number of pigs. The convergence is unreliable and only must come together with cash the last few days of a trading month. Regardless of your thoughts on delivery, next week we may see deliveries early in the week.
Boxed beef still trades at impressive levels. Demand is not an issue when it comes to beef to start the year, however, we are hearing our first signs of a slow-down. We have the superbowl which is not a beef event and lent. Those are two events that do not help, but I think we are coming up on a red-hot grilling season as quarantined people are ready to get out and splurge. The greater beef trading community maintains slight optimism moving forward even at contract highs for the live cattle futures. Good luck with the feeder calf runs and do not forget to look at a feed cost plan before diving in too deep. Have a great week.
Scott Varilek, Kooima Kooima Varilek Trading
The risk of loss when trading futures and options is substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.
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