Varilek’s Cattle Call: Fund Volatility

Livestock fundamentals didn’t play a big factory in futures trading last week in my view. The main stories of inflation and buying funds have conquered. Most agricultural commodities saw increases, with a few hitting contract highs on Thursday before a strong selloff took place. With funds rolled up in these markets, expect volatility to remain active. Nobody knows the answer to the height of the markets, so don’t expect an ingenious guess from me. It will be as far as the funds will want to push it. You should try to make smart and sensible decisions in the face of increased risk at these higher prices.

Spot trade had a steady feel with around $140 live and $224 dressed sparingly. Packers were again carrying limited buy orders and playing more catch-up on formula cattle backed up from the previous month’s slowdown. However, while we have this feeling of supported cattle with limited offerings, I don’t think we have an overrun of cattle looking for a home. With the herd of cows in continuous decline, are the figures there? Slowing down the line speed can be a move on the part of a packer to help limit livestock prices. The futures are trying to tell us that things should be higher than we are right now. Some of the deferred contracts carry prices north of $150.

We are going through crazy times with overseas tensions, truck convoys and trade tensions. There are a lot of risks on the table for farming, so it’s important to make the best decision for your operation. When fundamentals feature more prominently in futures contracts, we can make decisions more easily. Unfortunately for the moment we will have to adapt to the waves that come and go. Have a good week.

Scott Varilek, Kooima Kooima Varilek Trading

The risk of loss when trading futures and options is significant. Each investor must determine whether this is a suitable investment. Past performance does not represent future results.

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