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Varileks Beef Review
3-15-24
Fundamentals led the cattle market for the
first quarter of the year.
We have all heard and read about the decreased cow herd which
took prices higher. Lack of profits across the beef sector
encouraged liquidation of beef numbers in the United States in my
opinion. From the highs of 2014 until 2023, profits were harder to
find in the cattle feeding business. That smaller amount of money
passed down to a labor-intensive job of raising a calf. It was natural
for cowboys across the country lighten up on cow numbers.
For me, it is unfortunate that cattle producers
can only make prices
rally by liquidating numbers. Let me explain my thought process
here. The cash feeder market has had a great year. It is a market
with lots of sellers and buyers. Traders often say the feeders are
the leaders. It is a true picture of the demand for feeder cattle when
you see daily auctions and country sales.
The live cattle trade does not act like
the feeders in my opinion.
Selling cash fed cattle is mainly a formula driven industry with the
packers paying for cattle off of an index for cattle. If near 80% of
the cattle are coming to your door as a packer, why would you pay
up for the remaining 20%. It gives packers a lot of leverage when it
comes to purchasing fed cattle. You are not hearing the formula
versus negotiated battle because prices are high. It is still an issue
worth noting. When numbers are rebuilt, it will be highlighted again.
I continue to fight for the family producer that I know and love.
Later winter and early spring provided some
great feeding weather
for producers. Daily gains were amazing and showed up on carcass
weights for fed cattle. With cheaper feed and a producer fighting
the market, carcass weights could set some records throughout the
year. Many breakevens for spring and fall will be higher than $190
with the feeder prices being high last fall. Our genetics have
improved enough to allow cattle to grow like never before.
It is fun with record prices in cattle industry,
but now more than
ever, I will look long and hard at my risk level. The amount of
dollars producers handle is nothing to sneeze yet. Be careful in
your planning. Margins are tight in the cattle feeding sector making
it hard to make a strategy. Good luck and keep eating USA beef.
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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