Varilek’s Cattle Call: Uncertainty at the Highest
Trying to figure out what fundamentals even matter to the markets is one of the battles we face with world unrest. The grain markets are not worried about acres or yield currently. With Russia invading Ukraine, the rumors circulate fast from port bombings to possible cease fire talks. Front month grains are spiking to levels not seen in many years and do not make small moves. Deferred contracts tag along and do like enticing for grain producers when looking into the next year, and consumers do not know how to figure what feed will cost for the coming year.
I continue to say that you need to focus on your own risks and be careful. Speculating in these wild markets is not for the faint of heart. Just know that you will not likely sell a high or buy a low and hit one out of the park. Somebody sure might, but nobody has the answer to how high or low markets can trade. If the war rages on for an extended period, Ukraine’s grain production could take a serious hit in many people’s opinion. That provides optimism for United States grain. However, if the war persists, how long until other countries need to act in the turmoil and does that then scare the markets lower? Regardless, there is a lot to digest and blood pressure monitors will be in high demand.
Up front, the live cattle market is struggling with feedyards trying to move cattle quicker with higher priced feed costs. That can be a short-term negative, but when the yards liquidate, I feel the cattle on feed numbers will be tighter than expected. The big picture optimism remains in the cattle industry with a shrinking cow herd over several years and rock-solid beef demand. Look for the next opportunity with the large moves. Maybe it is time to look at purchasing some cattle to feed with the recent break, but tread carefully on the feed coverage. Farmers, maybe a few stair-stepped cash sales to ensure some coverage is the way for you. Good luck on your planning but surely start if you have not yet. 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.
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