Varilek’s Cattle Call: Recession Fears Mount

It was a rough week for the cattle futures as of Thursday. Live and feeder cattle prices were tumbling in Chicago even with oversold conditions. The June board at $132 was well below the $140-142 cash trade in the country. Some of the $142 is for delivery in the second week of June. That is an atypical $10 basis for that deep into the month. Continuing to buy cattle for one month out is keeping the packers in the driver seat. Funds did not appear interested to buy the futures with swift liquidation of the June contract.

A break this fast can make a producer trade with ripe emotions. Tread carefully in this hostile environment to ensure you can protect your own bottom line. Not only did the cattle markets break, but corn futures climbed nearly fifty cents for new crop corn. December corn futures are trading up against contract highs after the USDA grain report Thursday. Seasonally grains can form a top here, but there is too much growing season and world uncertainty unfolding. Inflation is still a key story for the grains in today’s markets. Now if we can only get that to spill over to the cattle.

Quarterly profits for the JBS and Tyson were released last week showing large earnings. Government officials are taking note of what is unfolding in the cattle industry and will hopefully help the northern family producer to stay profitable. Continue to stay involved with your preferred organization so we can work together to find a solution. Cow herd liquidation and packer control is not what I have in mind as a cattle producer, and I hope we can have better days ahead. Be sure to catch some sun, and buy some steaks from a USA producer to enjoy.

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.