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Varilek’s Cattle Call: Grain Markets Soar

The grain markets remain in the headlines with contract highs on old crop corn. The May corn contract is now in the delivery process. With a close above $7.00/bushel on Thursday, no deliveries were posted. If somebody like a large commercial for example wants to sell corn for $7.00, they can choose to do so. With zero deliveries at that price, the market is charging higher to find out what cash corn is worth.

The July corn contract was limit up on Friday at $6.73 ¼ /bushel. May futures were trading roughly $0.60 higher than July to finish the week. With that steep of a discount for July, we may will see plenty of fireworks yet to come. The U.S. dollar did trade noticeably higher on Friday for another factor to watch.

Planting is moving along fast with great conditions. However, when we get a month down the road, weather will become the new leader in the grain markets. Demand for corn created the rally we have now so any supply worries will add fuel to the fire with the funds already record long.



Feed needs are tough to protect in such a market. Deferred cattle futures are starting to show signs of life and will have to lead the cattle futures out of oversold conditions. With feed costs soaring, there will have to be incentive to want to put weight on the cattle. Packers are rolling in the profits with excellent beef demand, so if they want to keep any cattle on feed, premiums will need to be dangled in the futures in my opinion. The upfront pressure will be here as producers look to send them down the road with cost of gains higher than what the finished price will be. Strap in for more volatile grain moves with the growing season here. 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.

 


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