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Varilek’s Cattle Call: Decreasing supply is not sustainable

The cattle market had a great feel for being a seasonal sluggish time of year. Lower cash bids early in the week could not break the market. Expectations were that packers were gaining leverage with the song of “we are booked out”.  However, when the feedyards did not weaken, packers snooped around for cattle.  Bids only crept higher, but buyer participation was notably better. Dressed bids were $292-295 with live at $185-186. The southern bids of $175 were raised to $179 on Friday. Texas might have a showlist of 84,000 head, but they will only trade hundreds to set the formula price.

The choice select boxed beef spread is still trading around $25 leading me to believe demand is holding on strong. Labor Day can provide good beef demand, but beef prices will look to September for proof of on-going consumer choices. It may not be grilling season in the winter, but you should all look into a sous vide for winter steak cooking. I can attest that it is one of the best ways to cook a steak.  Creating new ways to enjoy beef is always a benefit so please check that out. Call my office if you have questions about that. 

The fall run for feeder cattle is right around the corner. Many feedyards are awaiting more numbers to fill the lot. My biggest question will be on the availability of heifers to put on feed.  Will they return an increased number to the cow herd or cash in on a great price.  Heifer retention still holds the cards on the length of this rally.  With packers holding all the leverage with near 80% formula cattle, we can only decrease supply far enough to make the market rally.  I do not call that a healthy sustainable market.  The other side of this rally will come with gnashing of teeth when the minority of individuals will be squeezed yet again.  Do not give up being involved in your cattle organization of choice.  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.