Varilek’s Cattle Call: Leverage over packer is key to a rally
The cattle futures and cash market took a break from the highs this week. A near $5 break in the front month cattle was not anticipated with cash trade above $140 just 2 weeks ago. Charts of the live cattle contracts took a negative tone with a broken trendline. That is something funds will watch for direction and can be one alarm for a market seeing higher prices. The cash this week did trade $138 early but appeared to slip closer to the $136 level on lighter volume.
During the weeks of rallying cash, the industry did see higher volumes of negotiated cash. We strongly believe with more negotiation we can get a price closer to what we deserve as cattle feeders. With less negotiated cattle in the last few weeks, we slipped. Packers are now buying cattle for delivery in the second week of January. A producer with market ready cattle can be quicker to sell with the threat of fewer current bids in the country. Those are some points that are being addressed in the latest pushes in Washington, D.C. There has never been a bill forcing negotiated fair cash trade, and beef producers should not be racing to become the poultry or hog industry.
Carcass weights were slightly alarming with steer carcasses 6 pounds over year ago levels for the week ending December 4, 2021. The weather has been outstanding promoting good gains. I know some people have asked Santa for a southern blizzard to get these gains down, but that seems hard to wish for. Likely some winter weather will come, but the mild temperatures have cattle moving along nicely. 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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