Varilek’s Cattle Call:  If packer gains leverage, cash could be impacted

Markets can change from week to week on a dime.  I might write this article, and things can immediately change. That is the world we live in and especially true when a market is near historical highs.

The war in Iran took the headlines over the weekend sending turmoil into the outside markets.  It put another level of uncertainty on the back of the cattle. The stock market was down significantly, and energy prices surged. Those two markets together have the possibility to question the demand ahead that we looked forward too. It is early in the stages yet, but the war appears to have potential to take longer than expected in my opinion.

Early in the week, cattle were resilient, but Friday brought things to an abrupt end. Futures prices dropped around $4.00 live and $7.45 for feeders. The cash market started at $240, but producers were willing sellers. Bids were pulled lower as sellers chased slightly. The feedyards hold big cattle, and how many is the question. If the packer gains leverage, the cash trade could be impacted. There are plenty of nerves due to the amount of money cattle are worth.

It is very hard to make decisions with all of this noise. We have Greeley, CO rumors of a strike, war in Iran, large carcass weights, and the Mexican border on the back burner. Seasonally, we are at a time the market can put in a top, so do not call me comfortable with the new outside influence. Keep your seat belt on and good luck with the hard decisions ahead. Have a good week.

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.