The cattle market continues its upward momentum, and Brad Kooima, with Kooima Kooima Varilek Trading, says strong cash prices and Northern leverage are fueling the gains.

“It’s always a lot more fun to report on a big bull market and higher prices,” Kooima told host Chad Moyer on Cattle Call. “That drag in this futures market higher because the cash market is so strong… ultimately to me, that still comes down to leverage.”

Kooima pointed to extremely tight numbers in the Northern Plains and an ongoing short supply, despite packers slowing their harvest pace. “I’ve never seen them this tight. It forces the packer to come and there’s not enough cattle to go around,” he said.

Even with lighter kills – last week at 559,000 head – Kooima estimates the available supply is closer to 580,000 to 585,000 head. But, he adds, “We’ve pulled cattle forward because the weather was perfect through the winter, and mostly we loved the price.”
As grilling season approaches, Kooima expects continued support for beef demand with Mother’s Day, Memorial Day, and Father’s Day on the horizon. But he cautions producers to stay alert.

“It’s not going to be rainbows here every day,” he warned. “Be smart here. Buy some puts. Keep some protection on… you don’t want to do 2015 again.”

Listeners also raised questions about CME settlement rules and the divergence between cash and futures prices. Kooima explained that feeder cattle contracts are cash-settled against a national index, while live cattle remain a deliverable contract.

“It’s almost become normal… to have this very wide basis,” he said. “Nothing says that it has to converge when cash is above futures.”

Looking ahead, Kooima expects this week’s Northern trade to remain strong.

“Nebraska and Iowa, very current and just a total lack of supply,” he said. He anticipates Northern bids around $226 to $227, while the South may lag closer to $220, widening the regional price spread even further.

Cattle Call is an original production of the Nebraska Rural Radio Association and is brought to you by Wolf Auto – Small Town Strong.