Varilek’s Cattle Call: Sparse Cash Trade

Last week the live cattle had an attempt of a rally with one day sharply higher only to be followed by more of the lower trade. The fundamental news is stacking up against the live cattle industry. Yet again producers are forced in to a struggle to get cattle slaughtered due to lack of packer participation. Bids are very limited in the country as feedyards are beginning to back up cattle. With cost of gains considered higher, producers are willing sellers of fed cattle but do not have the ability to do so. Long time family operations are going several weeks without a bid for fed cattle. The weekly slaughter levels remain respectable, but those levels are not coming from negotiated cattle.

Meanwhile packer affiliated growing yards are diving into more inventory in the feeder market. The struggle for independent producers continues as we look for help. Last week there was revamped producer movement to try gain traction on the political front as the Grassley and Fischer bills debate the future. It feels urgent that producers find a victory soon in marketing fed cattle. The vertical integration of the beef industry is moving faster than most expected in my opinion.

Demand is rock solid domestically with an increase in exports as well. Packer margins are historic with producers unable to capture more of the profits. This fall will need to end better than it starts for the long-term health of the northern feedyards and small communities. Sorry to bring all the tough news, but it is time for action in my opinion. Stay involved and 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.