Varilek’s Cattle Call: To Rally or Not To Rally
Scott Varilek, Kooima Kooima Varilek Trading
via Tri-State Livestock News (SD) - June 17, 2022
We really have two stories that are powerful factors on the market. The cattle futures do want to trade the warming cash cattle news and heat, but the economy struggle is not going away quickly. It will leave traders nervous with a new three-day weekend ahead. Some traders will look to the sidelines in times of uncertainty with an extra day of the markets closed. The Dow Jones is trading below 30,000 for the first time since early 2021, and energy prices are not giving up the charge. With the outside factors, we can say that the cost of production is challenging for the cattle industry.
Live cattle cash prices were the good news for the week. Prices were $4-5 higher this week with $140 trade finishing up in the south and $148-149 in the north. Most packers were actively looking for cattle during a time when large placements were anticipated to be showing up. Packers looked to be short bought and continued to pull contracted cattle ahead for slaughter. Producers held the ability to ask for a higher price and received it later in the week.
If fundamentals can win over in the cattle markets, we could see great days ahead. The increased female slaughter over the last few years and lack of profitability in the production sector could be rearing their heads as the market rallies in to the 2021 calf crop. The extreme heat will also slow down the optimum gains we saw earlier in the year, and $8.00 corn will keep producers from backing up cattle. Higher energy prices might also hinder the northern packing plants from pulling cattle from the large southern yards to keep prices at bay...