Varilek’s Cattle Call: Commodity Buying
All eyes were on the softening cash cattle prices for the north, but the futures markets raged on making contract highs in the deferred months. Prices for the norther fed cattle were $143-145 respectively with some $141 in the south. The south seemed a little more current than in the past with the north finding some cattle with a more days on feed. The premium structure appeared to give incentive to keep cattle on feed despite the higher feed costs. Carcass weights were still about 3 pounds over year ago levels. The north typically sees a growing showlist in September, and it can take into October to get better control over it. Weekly slaughter levels are strong, so the packer is finding cattle somewhere.
One major note is the cow slaughter has significantly dropped over the last 3 weeks. Female slaughter has been a large part of the total number year to date. If this trend sticks, packers might show a greater interest in buying steers from feedlots to meet up with great demand. Domestic demand has been a strong staple, and outside market nerves would be the one major risk to watch to affect that.
The futures market is on the rally with growing open interest. However, Friday was a day for all most commodities to rally. In my opinion, we saw some macro market interest pushing grains, livestock, and energies higher. The U.S. dollar was weaker on the day but remains at a historically strong level. The start of next week will be important as fundamentals may not have been the leader in the Friday rally. There is a USDA grain report at 11:00, and live cattle will have to digest the future of the cash market.
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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