Varilek’s Cattle Call: A bloody trail for cattle prices

It is a bloody trail for cattle prices after a break out to the downside on charts. Record prices are fun, but the correction can be brutal. We have a market that is not sure it found a bottom. Several days of limit down trade, cattle futures are nearing long term support at $275 for feeders and $198 for live cattle.

As always, nobody knows whether we will hold or not. We can only look at what we have in front of us. Fundamentally, supply is still tight and will be for a longer period of time. Heifer retention is happening with cheap feed and rain across cattle country, but it takes years before that turns into a steak on the plate.

The short-term supply fix is the Mexican border. It remains closed with no set date on a reopen. Both sides are meeting about the border frequently which hints that we are getting close. It will open in a matter of time. With all of the news on getting beef prices lower, the border would be one way to do so. That is if packers and retailers lower the price. We know what consumers will pay for a high-quality beef product. That money might just find another pocket to slide into.

Cash feeders took a big break with the lower futures. Some cash feeders are $80/cwt off prices from just 3 weeks ago. Rightfully so they correct with all of the uncertainty around political endeavors to get beef prices lower. Live cattle prices traded lightly around the $225 area. Packers are playing hard ball, but suddenly packer margins are green again. The incentive might be there to increase kill before the holiday meat demand. Have a good week.

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.