Varilek’s Cattle Call: Outside Market Pressure
Cash trade finished strong through Thursday with trade starting at $138 live and finishing with $142 alongside some $142.50 to a regional. The producer is finally hanging on to leverage over the packer, and not getting out of hand with it in my opinion. Producers have many reasons to be angry with the packer over the last few years, but they are making deals and keeping cattle moving. The basis is appealing with a $4-5 discount for the futures market. I expected the futures to like this news more than they did with the cash trade, but the long speculator could fear the uncertainty in the outside markets.
The latest pandemic news is a new repackaged Covid story with a new name, Omicron. Futures markets have traded through disease news heavy the past year and a half, so in my opinion, they will be able to shake off the bad news quicker. I understand that is a bold statement and remember that nobody knows what the markets are going to do including myself. We can look at the past to discern how markets react to recurring news for some direction, but it is new territory when dealing with something like this pandemic.
Carcass weights on steers are now higher than year ago levels. Weather is outstanding for optimum gains in the feedyard. That is alarming when comparing to the backed-up cattle in 2020 with slow chain speeds. However, there is a lot of profit in the beef industry, and the producer is now able to demand more of that pie.
Make sure not to give up on aiding in a long-term fix for the beef industry. When profits start coming in it may be easier to forget what producers just went through. Never has there been an opportunity to demand cash negotiated trade to stay alive. We currently have the ear of regulators and can give the small family operation a better chance of survival. Have a great 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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