Varilek’s Cattle Call: Fund Volatility
Fundamentals on cattle did not play a large factory in the futures trade last week in my opinion. The main stories of inflation and fund buying won over. Most of the agricultural commodities saw increases with a few making contract highs on Thursday before a sharp sell off occurred. With the funds wound into these markets, expect volatility to stay active. Nobody knows the answer to how high the markets can go, so do not expect an ingenious guess from me. It will be as far as the funds want to push it. You must try make smart sensible decisions when dealing with increased risk at these higher prices.
Cash trade had a steady feel with some $140 live and $224 dressed trading sparingly. Packers were carrying limited buy ordesr again with them playing more catch up on formula cattle backed up from the prior month slow down. However, though we have that feel of backed up cattle with limited bids, I am not thinking we have an overrun of cattle looking for a home. With the cow herd on the continued decrease, are the numbers there? Slowing the chain speed can be a move by a packer to help keep a lid on cattle prices. The futures are trying to tell us things should be higher than we are currently. Some of the deferred contracts are carrying prices north of $150.
We are in some wild times with overseas tensions, trucker convoys, and trade tensions. There is a lot of risk on the table for agriculture, so it is important to make the best decision for your operation. When fundamentals take more of the front seat in the futures, we can easier make decisions. Unfortunately for the time being we will have to adjust to the waves that come and go. 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.
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