Varilek’s Cattle Call:  Friday Struggles

It was a rough finish to the week with a sharp break on Friday.  The cash side of the market seemed to hold strong, but the futures were unexpectedly sharply weaker.  The outside markets were thought to have some spillover into the cattle futures with possible liquidation.

Cash trade started steady at $153 and rallied to $155 by the end of the week.  Northern yards feel current and are moving cattle along.  I have been mentioning that weights do not verify this, but even poor producers are having excellent cattle weight gains.  The weather has been phenomenal and is giving a needed efficiency boost with corn staying at a historically high level.

Feed costs remain in question with the uncertainty of winter prices.  The corn futures are on decline, but the basis continues to stay strong.  The United States dollar and energy prices will continue to be factors in the future of corn.  The dollar is seeing a significant correction from the historical highs which could boost some exports.

The cattle futures threw us a curve ball Friday with the sharply lower trade.  Fundamentals might be giving us indication that we can really continue the upward trend, but there can always be that wake-up call that will make you analyze your risk.  An old trader saying is, “you might be right, but you might go broke trying to be right.”  That looms in my head as I feel there is real upside opportunity in the beef industry, so I will make sure to be smart about it.  Demand looks to be strong and hopefully we are starting to see the other side of outside market struggles.  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.