Varilek’s Cattle Call: Inflation Looks Evident
The cattle futures finished the week on a strong note with more contract highs in the deferred live cattle. The open interest in the cattle markets grew substantially which led me to believe the funds increased their position in the futures. Inflation has been noted in the steep grain rally, but livestock prices have not yet joined that party in my opinion. Possibly this was our first sign of seeing somebody willing to step into the long side, and buying the deffereds looked to be the place to try decrease the risk of covid having an affect.
Fundamentals remained heavy with lower cattle prices last week. Live cattle bids were quickly taken from $108-109 in the north as large weight cattle need to go. Rising corn prices put pressure on feedyards to get rid of long day fed cattle due to decreased efficiency. Cash feeder calves were noticeably lower week over week as cost of gain projections rose. Feedyards that were figure 70-75 cents cost of gain were now tallying 85-100 estimates.
It remains to be seen how hard the funds want to push commodity prices, but we see growing interest from the funds exiting the stock market to enter the inflation rally. We have an interesting week ahead with much speculation on what happens with politics moving forward. Shut the tv off is my advice. Regardless, unrest and nerves are noticeable across the country. Look at these rallies for opportunities. We have had tough financial days in agriculture for a few years and finally have the chance to look at some profitable prices. Plan the trade and trade the plan. Nobody knows how high the markets are going so if someone gives you an answer to that question, it is a guess. Study your own bottom line and have your own goals to stay ahead of the game in 2021.
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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