Varilek’s Cattle Call: Continued Strength
Cash live cattle led the news again with more upper $140’s in the north and $142 in the south. Most packers were noted in the arena with the last chance to squeeze some cattle ahead of Labor Day. Bids were offered for immediate delivery to some while others were a month out. Dakota City was actively buying northern cattle which always is a good sign for the north.
Right on schedule I started to hear rumors of kill cuts by packers after a small spike demand period. Their margins have slipped to a more reasonable level of somewhere around the $150 per head mark which is a large correction from the $1,500 per head highs. Seasonally we usually hear of plants slowing down for repairs or to bring cash back down in the end of August. We still have regional plants active in the north with a tighter supply, so I do not expect a large correction in my opinion.
The live cattle market never saw a large summer low correction to this point leaving the bulls excited for the winter months. The deferred futures prices are toting high levels with a tight supply projection. The fall feeder cattle board traded above $190 with the momentary stabilization in corn. I look for a much better year for the cow-calf sector which is well deserved as prices of everything rise around us.
The cattle on feed report posted August 19 showed an “on feed” number of 101 percent. That was in line with the estimate. Placements of 102 percent were higher than projected by 3 percent, and marketings were 96 percent versus a 97 percent estimate. That may take the cream off the top of the market temporarily in my opinion, but the higher placements will have to do with drier conditions in some of the cow calf country. It does not mean that we found more cattle but just that they hit the feedyard early. 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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