Varilek’s Cattle Call: Demand rages on

The fed cattle market had a cash range from $122-$127 live. Bids were again spotty, but we did see some notable upper end of the range trade. The south is catching more of the $122 trade. Prices in the north have increased for the past 3 weeks but with the same small volume of negotiators. Boxed beef is on a seasonal break ending the week near $308 for choice boxes. That is still a historically high price proving demand rages on.

Last week the Senate held a hearing regarding the cattle industry. Producers’ voices are finally being heard to push the government to dive into the pricing structure. It is the ongoing debate of mandating cash trade, building more plants, or breaking up the big four for examples. We saw the formula victors talking how great of a system we have for the south to be incentivized to feed better quality. The reality would be that the north is already packed with quality so there is no need to add premiums if everybody has it. You can get a premium from some grid programs, but you do not get to negotiate your base price. Also, the south will receive more premiums, and we are left with very few trying to negotiate the base price. You might be able to get a few more dollars than your neighbor, but the packer can make over $1,000 per head with captive supply in their pocket.

Justin Tupper was an excellent representative for the northern family feeders and did an outstanding job telling the story. If you can, buy that man a steak if you get the chance. I still have hope after seeing the Senators ask tough questions to why their phones are ringing off the hook from cattle producers wanting to know why packer margins are strong with negative feeding returns.

The cattle on feed report is a little friendly in my opinion. On feed numbers for May were at 100% versus a 101% estimate. Placements came in at 93% versus a 95% estimate, and marketings of 123% were in line with estimates. It was an eventful week for industry news so stay involved and keep up the good fight.

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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