Varilek’s Cattle Call:  Seasonal Strength

After a rough midweek break in the cattle futures, a rebound Friday erased most of the losses.  A two day break in live cattle and feeders was turned around with what appeared to be further fund buying.  The open interest has grown in the live cattle with supply optimism being the main story.  Seasonally the live cattle contracts can put in a high during the month of March, but that has not appeared to be in the cards yet.

The United States is debating on capitol hill whether to block Brazilian beef imports after the latest case of BSE.  The three major cattle organizations and the USDA have shown support in a ban of the beef.  The BSE case was a-typical which will make for a tougher call for a decision to be made.

Cash cattle trade was spotty but at a good price.  Dressed bids of $265 and live of $165 bought cattle in the north and south.  The prices were appealing but not as widespread as I would have liked to see.  Outside cattle that were carrying mud saw most of the dressed bids.  Yields have been tough on yearlings that carry a lot of mud.  Boxed beef prices maintained strength keeping multiple packers looking for cattle however.

Winter weather has been a major factor creating lighter carcass weights in the feedyards.  Those weights will likely remain under pressure in the foreseeable future.  Friday’s rally in the markets is also coming with more winter weather in the forecast for cattle feeding country.  It is the winter that keeps on giving.  The spring weather looks to be bullish mud boots so check for holes now.  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.