Varilek’s Cattle Call: Live Cattle Breakout

We saw contract highs for the October-February live cattle last week after the cash strength for the end of October. There was finally some significant movement in the open interest for live cattle with three consecutive days increasing through Thursday. That could have been a sign of the funds entering the market with strong technical and fundamental signals last week.

The cattle on feed report a week ago showed lower placements and an increase in marketings. It was evident with the larger daily slaughter numbers that cattle continued to move through the pipeline at a good pace. The increase in beef slaughter year to date can be attributed to an increase in cow and heifer slaughter. 

Cash cattle trade through Thursday is yielding a $2 increase in the north to $154 and a $1 in the south up to $151. Many feedyards are asking higher prices yet but have not come to an agreement currently.  Negotiated traders are gaining confidence with the higher move in cash, and seasonally there are better days ahead after the month of October. Carcass weights are the one factor that does not share in the optimism. A weekly increase of 4 lbs over a year ago on steers and 3 pounds for heifers proves that cattle feeding weather is near ideal. Closeouts are showing great daily gains and moving cattle ahead of schedule. 

Cattle producers are feeling optimistic, but continue to manage your risks. The checks being moved around are carrying a large total as it feels more important to find out what time the mailman is showing up at your house. It might be a year to challenge old ways of trading to find some other options. There is an unintended pun for options apparently. 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.