Varilek’s Cattle Call: Plenty of Supply
After a week away from writing, we are still in a holding pattern over in the futures market. Every year we drag though the end of the summer, and I cannot wait for it to be over and on to new purchases of feeders. The news gets old and repetitive, so let us cut to the chase.
One of the main stories I heard among the traders last week was the large amount of contracted cattle in the south region. The major packers were said to have a large percentage of cattle supply at their disposal for the coming months. Many of those will price from a formula of the cash market. In my opinion, the large contracted cattle statistics have kept the long speculator from wanting to buy this discount in the futures market.
We will find out the true health of the market during this stage of decreased producer leverage. The negotiated cash prices in the north are maintaining premium to the south cash with large slaughter numbers for the month of July. The good news is we are still current as we enter the fall with the strong basis continuing to help keep cattle moving.
Fed cattle cash trade was steady to slightly weaker with 180-185 dressed trade. The regional packers are offering a premium over the majors to help keep prices where they are. Packer margins are still well in the green creating additional competition for the producers benefit.
If you take a drive through cattle country, you will see more empty pens which is resulting in some anxious cattle buyers. This is the case every August with the fall feeder calf runs not started yet. A fair share of producers are using ninety cents currently. However, cost of gains will be up in the air when figuring breakevens moving forward. Just make sure to have your plan and numbers crunched. Good luck as always.
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.