Varilek’s Cattle Call: Feed Cost Correction
Fed cattle cash action helped boost the futures last week with $3-5 higher cash in the north with the topside of $145 live. Packers seemed hungry for cattle and were rescheduling delivery for earlier. In the past it can be inconvenient to switch plans, but high-priced corn makes it a win-win for producers too. Carcass weights might continue to decrease with corn basis staying strong. Showlists were cleaned up quickly with all packers noted in the trade.
I like the action in the country with packers pushing a little harder. We hope it is a sign that we have seen enough herd liquidation to allow cattle to reach higher potential levels. The cattle on feed reports have not looked friendly the market, but producers are anxiously waiting for that to turn. It could be a larger question of just how many placements are coming from the dairy industry. Breeding dairy cows to beef bulls is proving to be a viable way to add value for the dairy industry. You can breed a lot of your herd to a beef bull, and then use sexed semen to breed your top females for replacement heifers. It is an evolving market that is learning to add value.
Feeder cattle are making a nice recovery on the board of trade as well. We are starting to see some opportunities for risk protection at nice levels. The main risk in my opinion is a looming recession. Fuel prices along with everything else are starting to take the breath away from consumers. I am bullish cattle fundamentals, but we always seem to find that roadblock to keep it in check. Stay safe and have a good week. A new federal holiday will have the futures markets closed on Monday, June 20 in observation of Juneteenth.
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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