Varilek’s Cattle Call: Into the fall run
We are into the fall run with feeder calves heading to the feedyards. The amount of calves is creating a high demand for trucks. I had one cattle buyer tell me not to bid unless I already have a truck lined up. Regardless, keep your pencils sharp and establish a marketing plan suitable for you during this fun time of year.
Some of the feeders purchased in the past few months are approaching black ink territory with the recent rally in the futures market. Better attitudes can be noticed across cattle feeding country as we continue the rally. The last year and a half of feeding cattle without much profit has been tough to swallow which is why producers are keeping a closer eye on breakevens.
Carcass weights were a touch alarming this week. We have eclipsed year ago levels by five pounds on heifer carcasses and six pounds on steers. This is a sign that we may be losing some of our currentness in the feedyard.
In my opinion, part of the problem with growing carcass weights has been the large increase in formula traded cattle. Since the Holcomb, KS plant fire, many of the formula traded cattle needed a new home to be harvested. Since the fire, formula traded slaughter in Kansas was 116% of a year ago with Nebraska formulas at 109%. The cash negotiated slaughter for Iowa was at 69% of a year ago with Nebraska negotiated cash at 63%. The formula cattle were taken care of by the packers, leaving the producers who negotiate cash prices struggling to get cattle moved.
There are a growing number of northern producers trying to find ways to make the southern feedyards set their own cash price rather than using the north to price their formulas. While I have been a part of conversations on this topic, I do not have the answer and am welcome to taking ideas. However, when the entire state of Texas cash negotiates 2,741 head in one week out of a total of 95,158 head sold, we are losing leverage. Hopefully we can at least maintain some green on the futures screen to keep us all just a little happier.
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.