Cattle were mostly higher early Friday except nearby live cattle, hogs higher, grains sharply lower.
Cattle Chop Digesting ICE Raid Headlines
The cattle market has seen a choppy week reacting to several headlines.
Futures were down on Thursday and nearby live cattle were still seeing some pressure on Friday with concerns about lower slaughter numbers tied to ICE raids in Kansas meat packing plants this week.
Scott Varilek with Kooima Kooima Varilek says cattle slaughter was only 94,000 head on Wednesday and 90,000 head on Thursday due to plant disruptions.
One of the major packers in southwest Kansas only slaughtered 500 head on Wednesday, well under the 5,600 head capacity.
Producers Losing Cash Leverage
Varilek says the slowdown in slaughter has hurt producers leverage in the cash market and it has been reflected in northern bids.
“We got a $219 bid out there and they felt like they were doing you a favor. We were quick to pass expectations of $225 or ask $228, maybe take $225. That’s drifting away because, yes, slaughter is way back. We’ve got one of the majors talking about a three-day kill week here in the near future and that maybe they don’t need many cattle for the entire month of October. So right when we thought we were getting some leverage from the packer, it feels like that rug got jerked. So here in the north, a little bit more of a struggle is what it looks like,” he explains.
That has been complicated as well with the Joslin, Illinois plant closure as those producers are looking for a new home to sell their cattle.
“This is when we’ve got all these long day fed cattle ready and and diesel prices are not going to allow that packer to ship them south like they had in the past. So, I think between the south and the north we’re really going to stay you know much weaker compared to the south,” he adds.
The south will because their numbers are tighter and the packers take care of their formula cattle suppliers.
So far only light cash trade has been reported in the north at $350 dressed and $222 to $223 live, which is steady. Varilek is hoping if the futures can stabilize there could be some better offers after the close or over the weekend like there were last week.
White House Reconsidering Increased Beef Imports
Another headline that hit the market this week was that White House officials were reconsidering the increased beef imports to lower beef prices. The White House denied it.
Varilek says psychologically it would have an impact on the market and while in Washington D.C. last week he and other cattle groups told lawmakers they were frustrated with this action but he’s skeptical it will change anything.
“I think that the White House has their mind made up that they want this done and it’s going to happen. Though to me, yeah, it feels good. They’re fighting for us. They want to try to reel that back in and they’re trying. But I think the mind’s made up that he wants it, this beef coming.”
Varilek says there have also been rumors this week about the administration banning beef exports and another about not allowing cattle and beef exports and imports from Canada.
With the lower open interest in the market those headlines have been jerking the futures around creating choppy action.
Cattle Futures Holding Lows
The positive is the futures have held the lows according to Varilek.
“We’ve had three big legs lower and now we’ve kind of held. We did our little ABC correction. Now, if we can take out some of the prior highs that we had this month, these charts are going to look a lot better. So we’re within just a few dollars. You know, I guess September feeders were right there trying to challenge it now that October is the lead. We need to get to where that index is at. If you could get to that $338 or higher, you’re going to feel a lot better about the charts,” he explains.
Live cattle have a little more work to do. “There was that big long uptrend line that we talked a month ago that we broke and looks a little troubled. If you leave that line on, we’re right back up bumping our head on it.”
So Varilek says October and December live cattle need to close above $223 to turn the technicals positive.
Feeder Cattle Up With Cash as Second Port Opens
Feeder cattle are higher Friday on the pullback in corn and strong cash trade in the country. The feeder cattle cash index has been moving higher as the fall run in the north is starting and numbers are tight. The Cattle on Feed Report placement number confirmed that.
“It feels like the numbers aren’t there. So is this heifer retention or is it just that tight? I am leaning to some of both. Yes, we’re tight but I do think some of the heifers are trying to get kept back. So this is part of that rally the numbers are going to be tighter and cash feeders are going to stay strong,” he says.
Plus September went off the board yesterday and the deferred months are all at a big discount to the index.
The Santa Teresa, New Mexico port opened Thursday but only 400 head crossed, which was under the 1,000 head a day expected.
Varilek says that isn’t anything to worry about. “The incentive to bring feeders across is there. They’ll get their ducks in a row, get them coming. I think that’s the full expectation here.”
Hogs See Muted Rally on Bullish Report
The lean hog futures were higher on Friday morning but it was a muted rally relative to the positive numbers in the USDA Quarterly Hogs and Pigs Report.
Compared to a year ago the herd inventory was down 1.5%, breeding inventory down 1%, marketing inventory fell 1.5% and June/Aug pig crop was down 1.5%.
Varilek says this report seems to be lagging what they were seeing for numbers in the country.
“Last spring we are talking about the numbers are tight you know disease issues meant higher prices for isoweans and feeders just got out of hand. Now this market has corrected a bunch lower and everybody that didn’t have isoweans or didn’t have feeders last year had all these disease issues they have them now,” he says.
So its easy to get a contract and feeders are $100 cheaper than they were but the numbers are showing a tighter herd.
He says the market still reflects the lack of demand.
Grains Fall on Lack of China Details.
Grains were sharply lower on Friday taking out some key support areas on the charts.
Despite Jamison Greer, U.S. Trade Representative, saying on Friday they would release positive results Monday from the China summit, the market is disappointed with the lack of details to date.
Varilek says funds had pushed near to record long in corn and soybeans on hopes for additional China business tied to the $17 billion of pro-rated ag goods China committed to outside of soybeans.
“So that was something that felt outstanding. I really liked that. Thought we could rally on that. We’ve done nothing but just kind of break lower, not seeing any major, major details here. So hopefully we could get some Monday to pull it out, but we’re going to need to see these funds protect because if they want to start unwinding now, eyeballing a gap in the Dec corn at $5.09 it looks vulnerable,” he explains.
He says there were many positives in the grain market and now the rug is getting jerked due to the lack of details.
