Varilek’s Cattle Call:  Scratch and Claw

Cash cattle trade saw a small boost throughout the week.  Trade in the north was noted from $157-160 live and $252-254 dressed.  The south saw some Friday afternoon trade at $160-161.  Those were $3-4 higher for the north and the south week over week.  All of the packers were participating but with a more selective feel.  Clean or colored cattle made up the difference in how bids were given. 

The futures stayed relatively steady this week with prices holding near record highs.  It can be healthy for an overbought market to take a small correction, but breaks were held with the optimism in the cattle industry.  Only the summer live cattle months are left below $160.

The tighter cow herd and smaller on feed supply will be the major headlines for the beef industry for the next few years.  Smaller beef production is projected for 2023 keeping the deferred contracts propped up.  Demand is usually a little slower in February so some retailers are looking to stock up for the peak demand season around the corn.  Prices should be able to stay firm throughout the spring to aid in the good demand.  The north does market more cattle in the first quarter than the fourth quarter meaning there should still be a more adequate supply up front. 

It all feels good and looks good, but high feed costs still have some breakevens near red ink.  The expectation was for corn to break with lower futures.  However, the basis has maintained strength from harvest though our current time period.  High corn does keep a check on the carcass weights, and it is evident they are stay well below year ago levels.  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.