Varilek’s Cattle Call: Take my bid, or…

It was a mostly uneventful week with futures prices slipping from the contract highs that were recently placed. Cash was sluggish with a $1-2 lower feel. The confidence in $125 trade was not apparent. The south had too many cattle looking to be moved putting pressure on the cash prices. The threat was given to “take my bid or I will buy them from the south and ship them up.” That is more like the feel we are used to negotiating cattle in the north.

The Senate judiciary hearing is underway but is a lot to listen to. Much of the industry is intently watching as government intervention is likely to happen with or without the support of cattle organizations. That is why we preach to stay involved and work together to try come up with a solution. The path we are on is for more vertical integration and being large corporate centered. We have the ear of the public and government so I hope the industry can witness some solutions to help the independent family farms in business for years to come. In the current system, the packer has captive supply giving them the ability to have $1,500 per head margins at the peak this year while feedyards experience losses.

Continued talk of new packing plants circulate from niche marketers looking for investors. More plant capacity and competition would be welcomed to an industry that can only rally on herd liquidation. Currently the cow herd is decreasing with an increased heifer slaughter trend noted for the last five years. When the herd needs to rebuild is when the big rally happens. Heifer retention pulls pounds out of the feedyards during the rebuild. Enjoy some cooler temps and 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.