Varilek’s Cattle Call: Feed-needs scramble
The main story of the last week has turned to the grains. Beef producers have been able to go “hand to mouth” for the last several years with no major threat of a runaway market. The planting progress woes have added a new outlook on protecting feed and has beef producers contemplating marketing plans. We have turned enough calendar pages in the planting season to have made this a chance of higher grain prices.
The cattle on feed report on Friday showed less placements than expected at 109 percent versus a 114 percent estimate pre-report. The on feed number of 102 percent versus a 103 percent estimate was also a tick to the better. I think we had a small exhale after seeing the pre-report numbers.
The live cash market traded fully steady compared to last week with several 185-186 dressed trades. A $5 basis for the first two weeks of June is historically wide, so sellers were quick to pull the trigger. The calves have finally entered the fed supply chain after a grueling winter. With all the yearlings finally cleaned up, the carcass data may finally reflect some of the lighter weights.
My writing will continue to update the readers on the cash trade market because cash negotiated cattle are very important to our industry. A vast number of producers continue down the path of more formula traded cattle creating uncertainty on how we will establish cash trade in the future. The current large supply of cattle is already giving the packer some leverage, but the trend in formula traded cattle is a long-term risk in my eyes. The beef industry is my heritage, which is why I voice my opinion on the matter. Thanks to all who gave their lives so I can have this chance to live and share my passion for beef.
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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