Varilek’s Cattle Call: Cash Cattle Improvement
Cash cattle prices trader firmer last week. Prices started early at 180 dressed with some 114 live to round out the week. The price improvement showed packers were a little more aggressive with fed cattle purchases compared the last several months of struggling to get cattle scheduled for slaughter. Cash cattle trade in the south has been off the pace of the north but supply in the south does not sound as large over the next two to four weeks. Positive basis and higher corn prices have continued to keep us current.
The futures market showed a nice recovery last week testing the top side of the June trading range with a gap higher Friday trade. In my opinion, it is good to get excited, but we still have several summer and fall trading days to get through with a large supply of cattle. The 109.77 target on the October live cattle futures will be a key spot to watch.
On the fundamental side, carcass weights are still pacing below year ago levels and heifer slaughter maintains its strength over steer slaughter. The weekly slaughter numbers are staying on the larger than expected side. Beef demand will be under a microscope now that the major holiday grilling weekends have passed. Labor Day is usually the next chance for a slight boost in cash prices due to demand strength.
The choice/select spread at $24 shows the desire for quality cattle with more days on feed meaning the shorter days are taking away from higher quality grades. In my opinion, a healthy overall economy is driving up the demand for higher quality cuts as well. Telling my readers to grill steaks must be working so keep on grilling.
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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