Varilek’s Cattle Call: Commodity Buying
It was a fairly quiet front on the live cattle cash trade. The biggest highlight was the $142 trade in south which was $1 higher than the previous week. The north was thin with $226-227 dressed bids with a touch of $144 at the end of the week all on light volume.
It looks and feels like a typical September compared to seasonals. The September lull can carry on longer than expected as the previous year’s calf crop gets cleaned up. The independent north loses leverage with long day fed cattle, and the south narrows the gap or even passes up the northern prices. The biggest questions that remain is how small is this cow herd, or where are all of the cattle coming from? We did see a significant break from the peak cow slaughter weeks which could give feedyards some traction eventually after the fall contracts have been used.
It still feels like a majority of the crowd is bullish and believes we have record prices yet to come. Fundamentals could line up that way and feeder calf prices are demanding a further price rally to become profitable. We would all love to put a stamp of approval on a profitable beef industry, so I hope that is correct. Keep an eye on your risk levels as hopes and dreams do not always materialize. I see lot of neck stretching happening, so do not be the one that stretches too far. Demand is holding strong through thick and thin to this point. The overall economy will be the major factor to watch to maintain the desire to eat beef.
The Dow Jones saw major swings last week with another expected interest rate hike ahead. Consumers have not seen much relief in the category of higher prices, so my caution signals are fixed on how much buying power is out there. We have to be cognizant of many topics in the beef production business. 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.
Hay production has been reported to be 50% of average or less in many areas of Nebraska. The U.S. hay supply is at a 50-year low (Table 1). Couple this information with rising costs (Figure…
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