Varilek’s Cattle Call: Outside Markets on Stage

I see last week’s article was labeled recession worries, and wish I had a new topic. Unfortunately, it is still on center stage. The stock market took a plunge last week with a large break. Quarterly earnings came in disappointing for key merchants such as Walmart and Target. That showed that the middle class just might not be in the best of shape. It had been long talked about when the extra printed money would run out, and we may have found out. Although it might get people back to work with the many job openings, but we have an economy that is built on spending. High energy prices are taking more from the pocket of beef consumers as well.

Demand has been excellent for the last 2 years, and the packers have filled their pockets. Now when we get the supply to a tighter level to help with leverage, worries in the demand sector enter. I still see cow calf pairs bringing less than $2,000 even with futures prices dangling a bigger carrot. The cost of production is increasing, and I feel the producers cut is too tight to carry the large amount of risk. It is the same song and dance week in and week out from me I understand. We are in some risky times with the economy so I am putting my seat belt on for what could lay ahead. Maybe it is a swift turn-around, but it might be wise to be prepared.

Live cattle cash prices were well above the diving June futures contract with $138-143 prices across the month of June. Producers are taking advantage of the positive basis, and you can not blame them for rolling over quick to try capture a few extra dollars. Carcass weights are lower on the week with high priced feed costs but are still above year ago levels. There is a cattle on feed report on May 20 that may also have some bearing on the market. Have a good week.

Scott Varilek, Kooima Kooima Varilek Trading

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