Varilek’s Cattle Call:  Cattle on Feed verification of tight numbers

The cattle futures rallied back Friday to overcome an early week sell off.  Outside markets were causing long liquidation in the agriculture sector Thursday after the announcement of no planned break in interest rates.  The overall economy plays a big factor in how long cattle prices can stay at record levels.  Yes, supplies are tight, but how long can demand sustain increased beef prices.  The prices on everything else is higher, and input costs for beef producers are also a part of record prices.  If producers are going to make a long-term investment in beef production, serious incentive will have to be evident.

The monthly USDA cattle on feed report was another verification of tight numbers.  Numbers were all in line with estimates with “on feed” at 98%, placements of 95%, and marketings of 94%.  Smaller supply was evident with large expansion not seen in my eyes yet.  High interest rates coupled with higher input cost has made it tough to try plan beef operation expansion. 

Our bankers will be in our ear this coming year with the price of feeder cattle.  There are many different plans to price protect your cattle.  Be sure you are working with somebody knowledgeable when it comes to this big of an investment.  I would love to walk you through all of your options if you have questions.  It is a year like no other and feels good moving forward.  The biggest risk for me currently is the poor economy news, but breaks usually tend to come after something unforeseen in my opinion.  Have a good 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.