Varilek’s cattle call: Contract Highs
Boxed beef prices continue to decline from the earlier highs around $140 for the choice product. We do have an increased supply seasonally with the fall run of calf-feds still hitting the market and news of weak action on the trimmings portion of the carcass. Weights show we are still in the cleaning up process of the fall run. For the week ending November 30 all carcass weights are 6 pounds over year ago levels with steer carcasses a full 11 pounds over.
The live cattle futures market is making contract highs despite the declining boxes and larger weights. The funds are long and appear to be leading the charge in my opinion. Live cattle cash prices are following the futures slowly and do not appear to be the leader in the futures rally at this point. Regardless, we finally have opportunities in the feedyard to protect profits.
Last week was the meeting in Kansas City discussing the feasibility assessment of reporting negotiated cash cattle. In attendance were some of the primary beef industry folk from across the nation. The USDA hosted the meeting with three professors discussing the findings from their study. The information was very detailed, and I felt the data was excellent. I was honored to be in attendance with some of the beef industry leaders and appreciated hearing their findings in person.
Going forward, the many organizations present will now be asked to come up with recommendations regarding mandatory priced reporting. Two of the main issues are whether to change the reporting regions and/or break up the prices reported from the 0-30 delivery window into a 0-14 and 15-30 window. Mandatory price reporting will be up for renewal in September of 2020 so I imagine action will be taken soon if any at all.
An uptrending cattle market makes us all a little happier, and it is certainly more fun trying to answer the question “how high can it go” as opposed to the alternative. Winter is here, but at least we can enjoy some Canadian concrete to help the yard conditions. Get your prime rib aging for Christmas and enjoy the advent season.
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.