Varilek’s Cattle Call: Supply peak reached
Beef demand has held its own throughout our large supply of cattle. However, grilling season lost several weeks this year due to bad weather which we will not be able to get back. Beef sales have been good, but we are seeing our first sign of the dog days of summer. The pace of forward meat sales is slowing slightly. This is standard for the season as we typically see a fall off after Indepenence Day. The health of the U.S. economy has been a boost to beef demand for the last few years and continues to help the cattle industry move our product through the system.
The feedyards are staying very current at the present with yields starting to increase. Cattle could use more pounds to reach full potential setting up a possible holding rally. The new concern to factor will be the higher corn price. Will producers really want to keep feeding them if corn continues to climb? In my opinion, the deferred cattle contracts have not reacted much to the higher corn price but have followed the feeder futures lower.
Cash news was light last week with packers pulling from formula cattle to get them by. Prices ranged from 180-184 dressed with trade starting to leak in to July delivery. The June board maintained a lower price than cash since producers have the ability to deliver on that price roughly two weeks into the month of July.
Keep your head up through the summer lows and take it a week at a time. Higher feed costs are a new challenge for us. We know the supply of cattle will be large so stay current and don’t fight the market. The good news is between last year and this year we are at our supply peak according to the cattle cycle seasonal. Stay safe out there in the fields this summer.
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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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