Varilek’s Cattle Call: Disconnect between demand and cattle prices

We had a nice uptrend to the cattle futures after good cash put the bow on top to end the week.  Cattle were back to trading tight supply with numbers still historically tight.  Boxed beef prices have slipped, but packers found themselves close to the knife again with negotiators getting higher prices.

Live cattle trade started in the south at $184 and finished with some $185.50.  The north was able to get up to $187 on Thursday cash trade.  Friday’s trade was quiet after the bull rush the day before.  Some cattle were scheduled for quick pick up while packers were getting cattle around them for several weeks.

One comment by packers were the slipping box prices.  In 2020 when boxed beef was at a record level, cash cattle prices got as low as $80.  Producers were told they were not trading boxes but cattle.  A few feedyards brought that up to packers that we are trading cattle with tight numbers.  We all know that will not hold any firepower, but it is worth a chuckle.

The sad reality is the disconnect between demand and cattle prices.  With packer-controlled cattle via formulas, producers are not able to be as proud of good demand.  The retail and packer sectors get most of the benefit.   Apparently, this is not a problem as legislation to encourage more negotiated cash trade fell on deaf ears.  The only ways to get a cattle rally recently is to have less numbers.

We are still proud of the product we raise in the beef industry.  Imports are at record levels and formula cattle weights are also in new territory.  These are two band aids keeping cattle producers from making it to the next level of prices.  Eat American Beef and have a good week.

Scott Varilek, Kooima Kooima Varilek Trading The risk of loss when trading futures and options is substantial.  Each investor must consider