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Stalled Out

The cattle futures market ended the week with a lower correction for a few days. The charts have continued to hold the uptrend line which kept the panicking to a minimum so far. The cash market did not aid in any optimism with trade near 106-107 live and $168-$172 dressed. Many of the cash trades were for delayed delivery. The packer currently is getting quite a bit of inventory locked up, and it is the time of year when northern showlists start to grow. Leverage is still not on the producers’ side with carcass weights still 28 pounds over a year ago on steers, but with packer margins strongly in the green, cash may hold better than expected in my opinion.

Below are the USDA cattle on feed report numbers from Friday:

Actual Estimate

On Feed 102% 101%

Marketings 99% 100%

Placements 111% 106%

This report will test the market early for stability with the trendline (noted above) as a marker for traders to watch. It is not the kind of report we really want as we enter the fall run, and the large placement number will catch a lot of attention. If the long funds start to liquidate, it could have some negative implications. The one upside is that after two lower days ahead of the report, maybe some of it is factored into the market. Take the market one day at a time so let us dial in what Monday brings first.

Demand remains strong with boxed beef prices climbing with the increased Labor Day demand. Ground beef is sought after on this holiday and is evident in cull cow prices. Be aware of upcoming feed needs as we enter the fall and monitor subsoil moisture for indications if need be. In my opinion, grains are low enough to keep an eye. It is good to see kids heading back to school, but remember to stay safe on the roads.

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.