We saw another excellent finish to the cattle futures trade last week with April live cattle closing above $125/cwt. It was not without hiccups that it was able to accomplish that. Southern feedyards delivered several contracts of cattle against the February board during the delivery process. The February futures were carrying a significant premium to cash prices, so it was a move to narrow up the out of line basis. After two days of heavy deliveries, the funds were back to there ways of running in with buy orders in my opinion. Friday’s close showed another 55 deliveries that the futures will have to react to on Tuesday with the markets closed Monday.
The lean hog market is also picking up steam to provide a helpful boost to cattle prices possibly. The supply of hogs looks abnormally tight with packers searching for hogs to keep up. It is rare that packers are out searching for them with an industry that typically does not trade open cash hogs. The demand for all meats is outstanding, and the limited supply of hogs has summer hog futures trading over $90/cwt. China is also experiencing some disease issues alongside the United States fighting PRRS.
Keep a close eye on the carcass weights for singnals of feedyards becoming current. It does not appear to be soon but always seems to show up when nobody expects it. Winter finally showed up across cattle feeding country to maybe provide some friendly market talk with gains being suppressed with the extremely cold weather. I am sure the grill still works in the cold weather so keep it fired up 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 whether this is a suitable investment. Past performance is not indicative of future results.
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