Varilek’s Cattle Call: Capitalize on bull market but be careful

The futures were smoking hot Thursday and Friday propelling live and feeder cattle into all-time highs yet again. The strength came on the backs of the funds in my opinion. Large volume and big orders were noted all week during the fund roll from the October live contract to the deferred. It was exciting and breathtaking at the same time. Record highs were needed for the beef producer after years of tough sledding. Personally, I would prefer a more sustainable approach, but nonetheless, this is quite a ride.

The cash market did not appear to be the main driver of the weekly rally. Prices were slow to come from packers. Live of $183 started the week, and by method of pulling teeth reached $184 on limited purchases. Friday some producers were able to get $185 picked up with dressed bids lagging from $290-295. 

Sometimes people complain about fund trading, but they sure can help providing a long for the market on a move like this. Cattle futures have discouraged the long speculator from entering with some of the past rule changes, but new money is entering on this long uptrend. Spread volumes in the front contracts are larger than I have seen in many years. 

The challenge for us as producers is to find a way to capitalize while not risking the whole farm. There are plenty of options available when making marketing decisions. Find a plan that works best for your operation, and I would say use a knowledgeable advisor when it comes to making big decisions.  Beware of what goes up…you can fill in the rest there. This bull market feels good and looks good, but we have a mountain of dollars invested at theses levels with high interest. Be careful and call with questions.

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.