Varilek cattle call: good demand, high packer margin

August’s live cattle are at the end of another long series of deliveries as the south is unable to clear the list of fed cattle. A grower was posting deliveries in Tulia, TX. The feedlot was unable to find a packer to work with the rumor that they burned some bridges. These are just street speeches, but they need to be mentioned as it affects the basis of the August contract which is approaching its expiration.

Demand is apparently still good with a canned beef rally for 22 consecutive days. One of the main reasons for the recovery is labor supply issues for the packer. Obviously our country is experiencing this problem, but even with that in mind, the number of massacres last week is expected to be 665,000. There is over $ 1,000 in profit per head for the packer, so he should be able to find a way to attract some worker participation. If you’re an avid reader, you already know my thoughts on how the packager can have so much influence on producers. We cannot close the door and expect a better price with the packager who already has a captive supply.

The feeder cattle report shouldn’t carry much weight in the market in my opinion. The USDA showed 98% cattle fed, 92% placed and 95% marketed. Carcass weight has increased slightly and is 10 to 15 pounds from levels a year ago. We’re lower, but I expected the weights to take more distance than that compared to the 2020 debacle of insufficient slaughter capacity.

Feeder cattle sales are increasing and we have a lot of empty yards up north. Prepare your plan and keep an eye out for opportunities to block out certain eating needs if that sounds appealing to you. The pressure of the harvest and the liquidation of grain funds give us a break to make easier decisions to feed the livestock. Have a good week.

Scott Varilek, Kooima Kooima Varilek Trading

The risk of loss when trading futures and options is substantial. Each investor should determine if this is an appropriate investment. Past performance does not represent future results.

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