Varilek’s Cattle Call: Market Volatility |

Varilek’s Cattle Call: Market Volatility

The agriculture markets experienced one of the wilder weeks in recent memories.  Volatility in the grains spilled into the livestock markets to finish the week.  Corn, soybeans, and wheat took a major correction from contract highs with many longs trying to get out.  Just envision hundreds of people trying to run through the same small door all at once.

Feeder cattle futures are charging higher as the corn continues its correction.   One main saying for cattle prices is, “the feeders are the leaders.”  That looks to be true in my opinion with March feeders trading limit up at $144.15 as of Friday’s close.  Live cattle prices are finishing the week at contract highs from the April contract on back.  Remember the cattle limits are now $4.00 for live cattle and $5.00 for feeder calves.

It was talked about early in the week that funds were holding lots of bullets and getting antsy to enter the livestock markets.  It was no more than that thought coming up to trigger the push higher.  Open interest in the cattle futures grew Wednesday and Thursday confirming new traders in the market.  That open interest has been steadily growing over the last several months with better prices in front of us.  Lean hogs joined the cattle with a rally siting more empty slots in barns and African swine fever rumors in China.

Live cattle cash trade was a pile of manure to put it lightly.  Dressed bids from $170-$173 and live prices from $108-$110 were all the north could muster from the packer.  With the February board charging higher and a $7 negative basis, the feedyards were frustrated with the lack of leverage.  The cattle on feed report was neutral to slightly negative in my opinion.  The on-feed number came in at 100% versus the 99% estimate and placements of 101% versus the 97% estimate.  They were worth noting but may not be enough to scare off the fund push higher.  Enjoy the rally and stay buckled up with the volatile markets. 

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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