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Varilek’s Cattle Call: Cash Cattle Boost

 

Volatility still ruled over the agriculture markets. Lucky for must commodities, the trend has been higher as funds look to be long due to inflation reasons. Contract highs on the corn kept calculators busy to figure cost of gains when looking at new cattle. The stock market provided it’s own news with wild swings with hedge funds making the news in struggle.

Cash cattle finally took a small bounce from the low $105-108 range a week earlier. We saw prices of $178-180 dressed and live bids from $112-113. The producers were happy to close the gap that exists between cash and futures but still have some uphill sledding. Overweight cattle were in higher demand than a week ago as well which is many of the fed cattle on the showlists. Gains have been outstanding as we saw closeouts toting gains of higher than 4.5 pounds per day.

The USDA cattle inventory came out Friday with a little drama circling. The 2019 numbers were revised to show a smaller calf crop. Increased heifer slaughter in the recent past had many believing this, but it was never adding up in print. The current report numbers did not give much direction as to a major change in the cow herd or heifers for beef replacement. Heifers kept for beef replacement came in at 100% of year ago levels which was slightly disappointing. Regardless, many were left discussing the revisions to the previous year.



Packer margins are still very green. It is rumored to be the largest January profitability on record for the packer. Demand is awesome and continues to outperform expectations. No leverage being the theme of 2020, hopefully we can see a shift for spring when demand kicks it up another notch. 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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