Varilek’s Cattle Call: Mind Blowing Packer Margins
Live cattle futures sold off last week with a limit down trade on Thursday. Cash was quiet with light sideways trade around $119 live. June futures finished the week around $115 live with a $4 basis that is in line with seasonals.
The biggest story for the beef industry is packer margins. I have enlightened readers with many cash cattle changes needed over the last several years with the increase in formula trading being the normal. The packers have captive supply spoken for with few left to negotiate the price. Estimates on packer margins at the end of the week ranged from profits of $900-$1100 per head with boxed beef charging higher. If the daily kill is around 118,000 head, that is a profit of $118,000,000 roughly per day in the slaughter sector. Every semi-load of fed cattle equates to about $35,000 profit for the packer currently.
I wanted to share those numbers so you can understand the size of the issue producers are facing. The beef producer is the last of the independents across the larger meat sectors. It feels to be at the precipice of the shift with the disconnect of fundamentals to the cash market. Many producers across the Midwest are what make up our small towns and keep community events alive by sponsoring little league teams and FFA for examples. With packer margins of that size, cattle could be trading at record prices in the best-case scenario with room left for all sectors.
Beef producers are experiencing challenging financial situations and the spotlight on that disconnect is highlighted more now than ever. You might be able to make a couple more dollars than your neighbor with a formula but look at what we just left on the table. The truth of the industry is hard to listen to, and I urge you to keep up the good fight for doing what we love. Have a good week and GO JACKS!
Scott Varilek, Kooima Kooima Varilek Trading
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The cash cattle market remains steady with the charity bids of $1.91 dressed and $120 live trading lightly. The fed cattle producers are lulled to sleep with the steady bids with no apparent ability to…