Cattle See Profit Taking
Cattle futures were lower early Monday after a chart breakout Friday in both live and feeder cattle futures and higher weekly closes and Dec live cattle closed above the September highs.
Cattle were lower early Monday bringing into question the ability of cattle to hold the rally.
Brad Kooima of Kooima Kooima Varilek says the late week breakout in the futures was tied to the 20 cent drop in corn prices but it surprised him because of the cattle fundamentals.
“There seem to be in a real direct contrast to what the technicals are showing us. There is a technical number that I am drawing the line in the sand here for me, close above $227.50 in the December cattle. I think we’ll bring some fund buying. And I do know enough, even though I’m old, to not want to stand in the way of funds.”
Fundamental Concerns
However, he says fundamentally, he is worried about the premium structure in the market.
“The fact that the South is big premium to the North would tell you the North’s not very current. We’ve got some cattle. It feels to me like, while I’m not necessarily adamantly bearish, I just feel like we got to maybe set here for a little while, chop wood, whatever analogy I like to use. And maybe clean up a few of these long-fed calf crop. And there’s some big cattle out here in the north,” he adds.
Cash Market Disappoints
He says the cash market was disappointing last week with the south at $226, which has been steady for the last four weeks.
“The north traded finally towards $220 to a packer, to one of the majors anyway, late Friday, which was basically steady too. So the future’s got a bit of a premium to them now. So now we better prove ourselves,” he says.
Producers Lose Leverage
The problem with the cash market is producers have lost their leverage to the packer.
Beef plant closures in 2026 at Lexington, Neb., Souderton, PA, and Joslin, Ill. have taken away the producers leverage according to Kooima.
“You know, sitting here in Sioux Center, Iowa, one would say, well, what does Joslin have to do with it? Well, you’d be surprised how you throw a rock and those waves go all the way out. I mean, it’s completely disrupted the cow market. Ask anybody that’s got some fat cows around how their market is,” he states.
He says producers in the north are not able to compete in the shrinking negotiated market.
“We’re the negotiators, right? The South, largely on, you know. Hardly any negotiated trade there. Kansas and Texas have both failed for confidentiality for a couple of months in a row. So the fact that we have a few cattle now, look at the Nebraska numbers on feed and the Iowa numbers on feed way more than a year ago. The South is tight because the border’s been closed, right?”
So now there are some regional imbalance in supply and the north doesn’t have the buying power it once had. Plus, some of the cattle in the north were exported to the south and higher freight rates are creating a wider gap.
Beef Demand in Question
Boxed beef values drifted $11 lower on the Choice cutout last week with record beef imports, especially grinding meats. However, is demand a problem?
He says demand is difficult to measure but his sources are indicating sluggish consumer demand for beef.
“The grind has slowed up a little bit. Demand for hamburger is still pretty good, but not quite like it was. The general value of the boxes here. The choice select spread is pretty good, which is good, but that’s very seasonal. Otherwise generally I don’t hear anybody that’s real inspired here for a minute on demand,” he explains.
He thinks the higher cost of energy and talk of recession is holding the consumer back from buying beef. However, he thinks the idea that beef prices are too high is baloney.
“We’re struggling a little bit here. I think generally on the demand side and hopefully that gets better but usually not until you get a lot closer to Christmas and here we are only in the middle of October,” he adds.
Tighter Numbers Ahead
Supplies are only going to get tighter moving into the first quarter of the year due to the tight numbers in the Cattle on Feed Report.
Kooima is optimistic about the cattle market in that time frame if the north can get current on marketings.
But he thinks the market could get back above $240 early in 2027. " I think there’s a few less yearlings available because I think we are retaining a few heifers. So those went to the pasture instead of a feedlot. And so I think, you know, tight supply and hopefully a little more confidence in our economy and a little less noise out of Washington ought to help us have a pretty good first
quarter, I would think,” he explains.
He says that is needed with the high cost of yearlings and tight to negative break evens.
