Varilek’s Cattle Call: Higher Cash but Economy Woes

The front news story has been the health of the U.S. economy when it comes to markets. The Fed announced another interest rate hike which was expected, and analysts are calling more jumps in the future to try curb inflation. When that is the lead story in my opinion, it gets hard to make a marketing decision based on a topic with so much uncertainty. We can not be experts in all facets of the market.

On the fundamental side we can see higher cash trading with another $1 higher in the south to $143 and $145-148 in the north as of Thursday. The north was able to trade a couple higher with what I felt was great clean up trade. There were plenty of cattle on the show list waiting for the next rally to go. The north typically has some of those type of cattle seasonally in September. Cattle being shipped are showing a loss by my calculations if you did not have feed locked in. That could be why a few cattle stayed on the show list as long as they did. With the higher deferred futures and a losing pen of cattle, feeders can tend to fight the market to try find a better opportunity.

We saw a swift break in the futures prices Thursday, but it is hard to complain too much with a market that was just making contract highs on Tuesday. All in all, the cattle market has looked solid after being tested with breaks. Long term optimism is still the theme in the beef industry as long as demand stays away from any major challenges. In my opinion, I still like having my butt covered with higher priced feeders I am purchasing with topside open. I think producers just have an awful lot of risk with breakevens $15 higher than where fats are being sold currently. 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.