Cattle and hogs were mostly higher early Monday, with soybeans higher, corn lower and wheat mixed.
Cattle Futures Extend Grains
Live and feeder cattle futures were extending gains on Monday after higher weekly closes. For the week April live cattle were up nearly $4.50, June was up $5.25 with May feeders up $13.45 and August up $11.67.
Brad Kooima with Kooima Kooima Varilek says the rally late last week was impressive considering the equity markets were sharply lower on Thursday and Friday plus crude oil was higher.
What Drove the Rally?
He says the rally was driven by a combination of factors including a strong chart pattern which prompted some technical buying.
“I did not see Friday coming. I was surprised. A lot of that, you know, what you quoted for the week, an awful lot of that, especially on the live cattle, happened on Friday. Of course. feeder cattle futures were up a lot too which was part of the market. However, when you whip the horse it better run and we could have easily been lower Friday with the stock market sharply lower and with the lack of cash trade.”
He says the past futures rallies had been led by cash but this one was not.
“Instead this time it seemed like the you broke out of basically both flag type formations on the fats and the feeders and then you prompted either short covering, because open interest was no runaway, but I would suppose at least some fund buying in the deferreds. The funds don’t trade something that’s ready to go under delivery like the April, so the April was kind of under performing. So I think technical buying,” he adds.
Cash Cattle Steady to Higher
Cash cattle traded steady to higher on Friday as a result, which was also impressive according to Kooima.
The cash was slow to break but in the North the trade was mostly $235 live, which was steady. Then after the futures closed the South broke at $238, up $3 from the previous week.
“I thought it was going to maybe take a little longer. I thought it might take into the middle of April. And then I really agree that, you know, the supply of cattle here going into that second quarter slot is tight. And nobody’s going to be in a big hurry to sell a calf that’s barely fat in April or May. Maybe we just cleaned this thing up a couple of weeks earlier than I thought, which is awesome,” he explains.
Higher Cash Cattle Trade Again?
Show lists are fairly tight in the North and the bigger cattle have been cleaned up so will the cash be higher again this week?
He says it is possible as packers are starting to buy for the best demand time of the year for beef. “Yes, I think cash will be higher this week, whether it’ll be galloping higher like we sometimes get, I don’t know. I guess I do think we are going to maybe put some $240s hopefully up on the board next week or this week rather for cash. And then we’ll see once if we can maybe work more to those mid $240s here in the next couple of weeks after that. So I do like the way the cash market feels barring something else.”
However, he says Greeley is getting closer to a settlement which could have an impact. “I guess I’m trying to say it feels like the
toehold that the union has is starting to weaken, you know, in another week. Looks like maybe we’ll see or hear something in terms of a settlement there. So, you know, that bad news should be in the market. The Cargill talk about, you know, whether Fort Morgan was going to join that strike, that seems to have died down.”
NWS Case Pushes Feeders
Kooima says also pushing the feeder market on Friday was another case of NWS that was only 77 miles from the U.S. border.
USDA Secretary Rollins has said the border would stay closed until those cases started rolling back and further away from the U.S.
“Whether it’s a combination of these headline trading algorithms that react to those kinds of things or just to the reality of, holy cow, we thought we were winning. We thought we were pushing it back. This is what Secretary Rollins said has been necessary if we’re going to ever open it, that we need to see this thing in retreat. Now, we’re not too far from having that next factory of sterile flies operational, I understand. But yeah, I would guess too that that probably was, I mean, why else do you all of a sudden go up $7?”
Kooima adds that the cash feeder market has also been strong at the sale barns.
Hogs Trade Bullish Report
The lean hog futures are showing early strength on Monday after June and the deferred contracts closed higher for the week on the heel of the bullish USDA Hogs and Pigs Report.
Plus, Kooima says disease problems are ramping up and technically the market held support.
“Looking backwards the last two or three weeks, I liked where we held. We’d had a big correction. We’re still a long ways off the highs, even though we’ve had a couple of nice up days. Held at the 100-day. A little reinforcement on a hog report as the USDA continues to kind of amend, catch up to the shorter numbers with some revisions again. And just this morning, I’m talking to someone that I have a high amount of respect for in the hog thing, talking again about another part of the country here that just broke with a real hot strain of PRRS with an 85% mortality or something like that.”
That is fueling buying in the summer months, plus he says domestic demand has been strong due to the price point of pork and Easter ham buying.
Soybeans Follow Oil, Corn Eases
Soybeans and corn were lower on Friday fading the record levels reported in the RVOs but soybeans are back up on Monday with bean oil.
Kooima says bean oil is getting a push from $100 crude oil and sharply higher diesel fuel markets.
However, he likes the look of the charts and the seasonals are favorable.
“This is typically. where you get some movement between now and when we plant. But I also, you know, a little heads up, you know, this is where you start to kind of pick some targets here a little bit above us and start to do a little bit of pricing here.”
The other key is the market needs to get through the big USDA reports.
“And that’s there’s plenty of info on this report. On the one side, we’re going to get reminded about just how much corn we’ve got left over, especially compared to a year ago. My goodness. But on the other side. We’re going to, you know, let’s get dialed in just how much less corn are you going to plant. It’s not whether it’s going to be less than last year, how much less. With that average trade estimate, you know, in that 94 to 94.4 range or something like that. If I had to guess it, I would guess it would be even a little bit less than that. But we shall see,” he remarks.
