Varilek’s Cattle Call: Tough Sledding

We are in the cycle where my job as a commodity broker turns in to that of a therapist. I wish I had all the great advice to handle diving markets, but the rays of hope are still dim. A wise trader told me on my first day to “trade against your risk and you will never go wrong.” It appears risk is certainly still at the table in agriculture today.

Cash cattle prices have accelerated to the downside with a drop from 168 cwt to 160 cwt dressed between Wednesday and Friday. The free fall in futures and cash were major warning signs for the coming fall months. Decreased slaughter capacity had producers running for the door with physical cattle and paper positions on Friday. Weights are still below year ago levels for those searching for a sliver of encouragement. We are still maintaining currency in the feedyard, but producers need to keep it that way for a chance to find a bottom.

CEO Noel White of Tyson foods made a statement last week with an update on the Kansas packing plant. The plant has hopes to be back online by January after the fire one month ago. With positive packer margins, the incentive to reopen soon is evident.

Corn is making contract lows with funds adding to their short position. Yield data will be coming shortly to help us shed light on what the crop is. Grain farmers are continuing to express disappointment in yield projections, but it appears to be falling on deaf ears in Chicago. Ethanol demand struggles are also a factor in the latest break in corn futures.

It is hard to keep your head up with markets like these. Do the best you can to make wise long-term decisions with a clear head. Make sure we can live to fight another day and do not get too buried in the bad news that you forget to look for the next opportunity.

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.