Cattle Call by Scott Varilek: Lack of negotiated trade continues to haunt cattlemen
Progress on the Garden City packing plant has been slow coming this week. All indications are pointing towards a December 1st timeframe for the plant to be fully operational. Everybody has been keeping their ear to the ground for additional information.
Slaughter counts are maintaining better than expected tallies with the first week without Garden City, outpacing the previous week by 9,000 head. Record packer margin is the major reason for the uptick in slaughter, leaving the producers wanting a piece of the pie. Cattlemen are becoming angry after several rounds of losses in the feedyards with packers still enjoying large profits. With all the leverage in the packer’s hands, I can feel the tension rising across cattle country as cattlemen begin to wonder when it will be their turn.
A large amount of formula traded cattle will be filling up the majors in the coming months. The industry now has a smaller number of negotiated cattle, which sets the price for the market, hence the decrease in leverage. The many cattle once bound for Garden City are now filling up some of the remaining Tyson plants. That is enough on my continued rant on the lack of negotiated cattle.
The Labor Day beef purchases will be wrapping up very shortly. So, in my opinion, look for a weaker trade on the boxed beef prices coming soon. The futures may be warning us of weaker trade in the future, but it sure helps to enter this fall with current weights and a positive basis.
Last week’s cattle on feed report is shedding some optimism despite Friday’s negative market action. Come Monday, we might see that Friday’s action was a touch dramatic with the latest in trade war news.
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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