Varilek’s Cattle Call: Small Recovery
Open interest has been decreasing in the live cattle contracts for the last week. In my opinion, we have witnessed some short covering as prices stabilized in a range for the time being. Hedgers were not too happy with the price level to ride out a rally. However, I do not think we have seen a long speculator interested in diving into the market just yet. Currently we are not far enough through the summer for much follow through on rallies.
The north sits a bit more current than in previous weeks with the increased slaughter as the south still struggles to get caught up. Many fed steers are moving north on trucks filling slaughter capacity in other plants to help keep things moving along. It does hurt getting cash bids in the north, but we are starting to feel our way through this mess. Some analysts anticipate cash price to slowly increase.
Boxed beef prices have had a major correction from the spring spike. The high prices curbed too much demand, but beef should be available at much more affordable prices. Too many restaurants took beef completely off the menu with the uncertainty of availability. Our overall economy has held in better than expected and remains the wild card factor to whether beef can see a major recovery.
In the long run, we still see a decreased cow herd with opportunity some day down the road. Beef producers are starved for some cash flow after a gruesome ride from a plant fire to Covid 19. Feeder calf prices have seen a small boost here with some optimism for a better future. It could just be some fresh CFAP money diving back into the feeders. Keep the grills going as always.
Scott Varilek, Kooima Kooima Varilek Trading
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