Varilek’s Cattle Call: Cash Scarcity

There isn’t much to report last week in the cash cattle front as bids were unavailable for most of the feedyards. The inability to move cattle will further a problem with carcass weights. Two-week-old carcass data showed the weights down 2 pounds on the week, but currently my confidence in that trend sustaining seems rough. This week was one of the worst cash negotiating markets I have seen maybe ever. Packer buyers are not answering phone calls and the northern showlist will mostly carry over to the next week. Two notable showlists that I track are both growing in size, and even a few northern formula feedyards were turned away. Watch that trend for direction in the cattle market. If fear sets in with a perishable commodity, there could be some rough days ahead if the packer does not enter the market.

The futures market has been smashed with 13 of 14 consecutive down days. There was little interest from funds to take a long position and futures toted a $10 break from the contract highs previously posted. Hedgers started to scramble with the high-priced inventory to take quick protection. The open interest decreased from long liquidation and probably did not change as much as it could have if not for the added hedges from producers.

Boxed beef is on a seasonal break but remains at historically high levels. The political fight rages on as the shift from smaller family to large corporate yards continues. It is financially stressful trying to maintain independence in the beef industry. Producers are in a tough spot right now so I always remind you to stay involved for the business we love. Have a good 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.