Varilek’s Cattle Call: Increased Carcass Weights
Carcass weights were part of the buzz for the market news again. For the week ending 10/26/19, steer carcass weights were up 6 pounds week over week and sitting 11 pounds above year ago levels. Heifer weights increased 4 pounds week over week and sitting 7 pounds above year ago levels.
We are feeling the effect of the feedyards losing leverage due to these weight increases. News of some packers not accepting cattle over 1600 pounds is surfacing. Excellent feeding weather is boosting gains and intakes for cattle on feed promoting the increase in weight. The negative basis and producers fighting the market are also to blame for the cattle backing up.
Cash last week was $180-$182 dressed and $114-$115 live with some packers buying for as far out as December delivery. That was still on the $1-$2 higher trade, but we have lost some ground on basis over the last few weeks. The premium in futures has created some incentive to keep feeding cattle to capture the higher price.
Rumors were floating last week about a possible timetable for the Holcombe, KS plant reopening. The talk was that test runs will begin in December with complete operation capabilities tentatively set for January. In addition to timetable rumors, we have also heard of a possible increase in capacity up to 8,500 head which would be sizable if true. This story was not verified, but the market reacted to the news. In other packer talk, it was speculated some packers will be ending Saturday kills for the time being.
Continue to watch the trendline on the live cattle charts whether you are a technician or not. In my opinion, the reaction above or below the trendline will influence the futures market trade. Truckers are still in high demand after the heavy movement of fall feeders. Breakevens for purchases are more in line with futures than they have been recently. Grill a steak for a veteran this week. Thanks to all who have and continue to serve.
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.