Varilek’s Cattle Call: Cow herd liquidation done?

Cattle futures ended on a break with lower cash and box trade. The lower prices signaled some lower cash with a positive basis still available. Partly, I wondered if the heavy weight cattle had something to do with it. Yes, it created more production which is bearish, but producers have been paid well for large carcasses. If the market starts to feel toppy, those cattle are looking to be sold fast. A break to scare some big cattle to market might be good for us in the long run. Long fund positions are holding on in defense yet, but we can create a problem if we make our own wall of cattle. It is advantageous to sell a large critter in the current scenario. Stay aware of the mood in the negotiated cash world to see if the packer is gaining leverage.

Heifer retention is a big question mark. We saw a slight shift towards steers on the last cattle on feed report coupled with decreased year over year cow slaughter.  We might be at the point where liquidation of the cow herd is done. Cash feeder prices could be higher with less heifers in the sale barn as producers are bidding on a smaller supply. It is not definitive whether heifers are heading for grass, but a few signs are emerging.

Boxed beef can be sluggish in the weeks leading up to Thanksgiving which is a seasonal norm. I do not see weaker demand as a whole, but it is a little concerning when the stock market is on a rampage while we chop lower in the cattle market. Have a good week.

Kooima Kooima Varilek Trading