Cattle Call by Scott Varilek: Year in Review
The year 2019 may be remembered as a challenge on the pocketbook and the log chain for the most part. Many of the main story lines will carry us into the new year and continue to impact the markets. Crops and livestock markets will start the year with the same stories at the forefront.
Trade wars are hopefully coming to a more official end in 2020. We will keep a continued eye on China deal progress as well as the effects of a Japan and North America deals. The United States has a large supply of grains and a record meat supply that we would love to bring to the table everywhere.
The grain basis is improving through the end of this year. That appears to be from the issues of the past growing season with many believing we do not have the corn available that is calculated into the USDA reports. Regardless, cash grain prices are gaining strength and challenging the top side resistance points on the chart.
All the beef packing plants appear to be up and running for the start of the new year. Possibly due to the previous plant fire, we are still cleaning up some of the fall run of fed cattle which is evident in larger weights than year ago levels. The choice/select spread might also be indicating we have cattle with many days on feed increasing the availability of choice product. To start the year, many will take note of the large February Live Cattle open interest to see if a large roll or exit of the market takes place.
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African swine fever caught many storylines in 2019 and will continue to play a role in the world meat supply shortage. China appears to be in the rebuilding stage of their swine herd after the large losses. I hope you had a Merry Christmas and good luck in the new year.
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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