Varilek’s Cattle Call: Risk on Nov. 13, 2020
The cattle futures finished the week with a negative tone correcting the overbought status. Cash trade was viewed as bearish finishing from $108-110 live. It has been a strong rally getting to this point, and many reasons were to blame for the decline.
Mostly, the market is worried about news of a possible shut down. We remember how disastrous the last economy shutdown was to the cattle industry. The reminder of that event is sending shivers to the unhedged cattle feeders warranting downward pressure on the markets in my opinion. Feedyards are not ready to soak another large financial hit so a turn in the cattle futures price creates volatility. However, at least we have a better understanding of what to expect. Boxed beef prices are on the rally with the stocking up in mind. Retailers and packers will likely try being ahead of the game as shutdowns loom.
During the spring shutdown, demand held surprisingly well with the general consumer stuck at home for an extended period. There was a shift from restaurant to home cooking which maybe helped consumers realize you could have a high-quality beef meal from your own home at a cheaper price. The major issue was plant availability to harvest cattle. The backed-up line of fed cattle put most of the pressure on the cattle markets.
We know that tough times are still upon us and remember to plan accordingly with your marketing needs and goals. Risk is still in front of us so do not become complacent when the market gives you a ten-dollar rally. Is there room to go higher? I certainly think so but for now we must deal with the jitters of uncertainty and an old saying is “uncertainty is always bearish.” Thank you, veterans, from the bottom of my heart. Have a great week.
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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