Varilek’s Cattle Call: Large supply continues

Last week’s cattle market action was a little more of a sideways chop as opposed to the recent slide. The packer still maintained leverage, but basis has improved for the past two weeks. An abundant supply of cattle has been the fundamental view. I expect this to continue because seasonally the heavy supply will not lighten up until fall.

Some of the fed cattle prices slipped from 190 dressed to 185 last week. That sounds drastic but the basis remained the same with the break in futures. Packers continue to lock up cattle for three weeks out. The slaughter count for packers has been large with a 670,000-week followed by a 664,000-week. Those numbers were larger than expected for a month that was anticipated to be a hole in the supply.

Carcass weights are hanging close to last year’s levels with a slight increase in pounds. It will not be shocking if we are unable to stay below last years hyper-current weights. We are just starting to dip in to the 2018 calf crop which is a touch later than last year’s pace.

News broke on Friday that Japan would be lifting some restrictions on US beef. The US has been at a major disadvantage when marketing to one of our largest beef customers in Japan. More details are yet to come, but I do believe the commercial buying earlier in the week was because of this progress.

The major Northern feeder calf sales are slowing down making feedyards look to the south for inventory. Feeders will be looking for something to finish in the window of December 2019 through May 2020 due to the premium structure.

Scott Varilek, Kooima Kooima Varilek Trading

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