Varilek’s Cattle Call:  Weaker cash but stable futures

Cash cattle was disappointing in the north with $247-248 dressed.  With outside cattle standing in poor yard conditions, it was hard to call that a victory.  Inside cattle of course can fair a little better.  The south traded some $156 live on Friday afternoon which was steady over the last several weeks.  The south does have a tighter feel to it with higher feed costs while the north is fighting weather trying to keep cattle moving.  It has been said that the north needs a few weeks to clean up, but often the two weeks expected drags on longer than anticipated.

The futures markets are holding on despite some of the poor cash news.  Optimism on the long term front is still the main story.  The biannual cattle inventory report will be held on Tuesday, January, 31.  Estimates will be for a decreased cow herd size and lack of growth due to the large female slaughter over the last couple of years especially.

Deferred contracts in the live cattle are only $2/cwt below all time highs for the industry.  Fall feeder prices are already testing north of $210/cwt.  With the optimism comes a lot of risk.  Buying feeders becomes a challenge with a large premium dangling out front.  Have your plan, and trade your plan.  The amount of money we are all handling in the industry is even more than we are used to.  Plus, we get that higher interest rate in the foreseeable future.

Feed costs are also maintaining strength even with lower futures prices on the upcoming CME contracts.  With the latest rebound in the futures, it might be a steady to stronger market until we see acreage numbers on March 31 in my opinion.  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.