Varilek’s Cattle Call: Spring Rally

Producers are witnessing a little benefit to finally call it a spring rally. Cash cattle traded as high as $125 in the country providing a 3rd week of higher prices. Packers are showing a lot more interest with more buyers circling the country and reaching out to feedyards again. In the past it was hard to get bids from time to time, but the last few weeks have been easier to market fed cattle.

Boxed beef is a large part of catching a cash rally with choice product trading at $271 at noon on Friday. The packers are enjoying very large margins even with higher cost for cattle. There is plenty of room for fed cattle to trade higher with those packer margins but getting that done is still the issue standing in the way of producer profitability. Feedlot closeouts are still coming in with many triple digit losses due to higher feed costs. More CFAP money showed up for producers this week continuing to try patch the losses in the beef production sector.

The livestock futures took a sizeable hit Friday after a $7.00 rally. The June contract was -$2.45 on the day signaling some possible exiting of longs. The funds have carried a long position for several months, and the rumor out of Chicago was that funds were starting to roll out of the June contract. For the technical traders, livestock were overbought on the stochastics and broke a short-term uptrend line. The trendline and stochastics both aided in the weaker trade.

I hope you all had a good Easter with family and can get out and enjoy the spring weather. I think we have a U.S. population that is ready for some much-needed rest and relaxation. I expect the traveling season will be busy propping up the recovering restaurant business. 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.