Varilek’s Cattle Call: Hot Cash market

A Happy Thanksgiving it should be for producers who saw a nice jump in cash trade. Live cattle trade started the week at $136 and ended Wednesday at $140 live in the south. It was a long time coming for producers to gain full leverage over the packer with demand sustaining excellent movement. The prices were moving swiftly with feedlots not remembering even how to be this bullish. It has been 2 years since some feedyards were able to pass on a bid. This trade will leave the feedyards current and not willing to drop prices very easily.

Feeder calf prices are on the rise with profitability in the fed cattle sector. Futures prices from February on back are making contract highs with funds joining the party in the last few weeks. Deferred feeder calf prices are nearing $180 respetively. I do believe this rally is where we see relief from the last 3 years of a struggle for the beef industry. In my opinion, it’s a market that you can find some sort of price floor and leave the top side open. Nobody knows how high it will go, and you will start to hear the saying “the market tops when the news is the best.” We have a lot of good news in front of us and hopefully more to come.

It is not for certain if the recent political push to fix the cattle market has prices moving higher, but it certainly did not hurt in my opinion. Fundamentalist have been talking of tighter beef numbers coming with a decreasing cow herd, so the cattle cycle will also play a part here. Once we see feeder prices moving higher, many will want to rebuild the cow herd and hold heifers back for breeding. With less heifer slaughter, that is when the tight fed supply has an opportunity to shine. We will be watching that closely for market direction in the coming years. Have a great Thanksgiving!

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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