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

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