Varilek’s Cattle Call: Steady cash and High Boxes
The cash cattle market remains steady with the charity bids of $1.91 dressed and $120 live trading lightly. The fed cattle producers are lulled to sleep with the steady bids with no apparent ability to ask for higher prices. Demand remains excellent with boxed beef raging to $340 for choice product. Packer margins will be near $1,500 per head profit. The disconnect between demand and the producer is widening everyday with no progress to show.
In my opinion, the fed cattle industry is in a shift from smaller cattle producers to a more vertically integrated model. The family feedyards and custom yards are facing struggles competing in the negotiated cash business. Only the formula traders are managing to catch the premiums by handing over the captive supply to the packer in advance. With the shift away from negotiated trade, cash cattle prices remain well below potential.
Futures prices are chopping in a range with premiums for the deferred contracts. Many believe the cattle industry will work itself out and have a better future, but that turnaround keeps getting pushed down the road. Feeder prices last week showed an uptick with some larger runs noted.
Grain prices are into the weather season with large trading ranges intraday. You can find the story you want to verify your position on the matter. We have a bumper crop in Indiana and a hot weather ridge in the corn belt to the West. Demand alone got us to the high prices and any growing issues will be magnified. Stay cool and stay safe.
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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