Cattle Call by Scott Varilek: Feeder Prices Impress |

Cattle Call by Scott Varilek: Feeder Prices Impress

At our halfway point through the summer, cash feeder prices had a better than anticipated start. The rumor is feedlot owners are using a breakeven of $120-$125 when making feeder calf purchases. That was taking in to account the higher price of corn. The overall tone remains optimistic and reminds me of the quote, “the feeders are the leaders”.

Live cattle traded as high as $116 in the north with a slight improvement over last week. Cash prices in the north maintained a strong premium to the south which is very uncommon during the summer run of thecattle season. Packer margins have plenty of room to soak up the uptick in cash price.

Last week’s posted weights were seven pounds below a year ago on all cattle. This shows we are maintaining currency in the feedyard. That is the bullish tone of the market, but the bears are starting to say the cattle are still to come with their fallback to the “wall of cattle to come” hypothesis. Regardless, we know the price for quality beef is distancing itself from lower quality cuts. Part of the reason is the lower weights, and less days on feed decrease the availability of choice and prime product. Basis and corn price are two of the more recent factors for less days on feed.

This is the first-time cattle have been overbought in the last three months. It makes it a little easier to make decisions on an up move during the summer slump. Hopefully higher prices can provide some positive returns in the feedyards for a change.

Scott Varilek, Kooima Kooima Varilek Trading

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