Varilek’s Cattle Call: Cattle Clean Up
The cash cattle prices continued to slip with trade from $103-$107 on the week. Packers just started dipping into the calf feds with yearlings finally near the end. Steer carcass weights printed 49 pounds heavier than year ago levels showing our lack of currentness. Cash bids were not widespread with producers forced to take whatever they could get. Leverage for the producer was still nowhere to be found, but slaugther rates increased substantially. The estimates from a month ago regarding how backed up the feedlots would get may not be as brutal as first calculated, but do not get me wrong. It is still sizeable.
Chart-wise we filled a gap on the August live cattle chart which held as support recently. Gaps are meant to be filled is the trader consensus when it pertains to charts. You can now look at it two ways making it more confusing. Do we head lower without support or rally with no worries of a gap below us? In my opinion, the lack of leverage and heavy weights keep us struggling in the foreseeable future. However, I believe the panic sell off when everything hit the fan already took place. Much of this could be currently priced into the market giving me the opinion that a large break has a smaller chance. I just wish we were further through the summer. We have the dog days yet to come.
Boxed beef continues to nosedive and needs to discover a price range where both retailer and consumer are happy. Choice boxes are already supporting a more than $200 break. Traders are asking the question to whether it can hold a price of $200. Sloppy outside markets and indications of a recession will not make it easy to find the sweet spot for demand. Have a happy Father’s Day Mick. I hope all you fellow Dads have a great upcoming weekend and go eat a steak.
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.