Cattle and hogs are higher early Friday. Soybeans are also up a third day with corn and wheat struggling.
Cattle Recover Fading Possible Plant Strike
Cattle futures were down sharply on Thursday and touched limit down on some contracts with fear of a workers strike and the JBS beef plant in Greeley, CO. Scott Varilek with Kooima Kooima Varilek says the market tanked as there were no buy orders in to stabilize the market. However, he says some of the crash was tied to profit taking after the market got overbought. Cattle rallied Monday through Wednesday into new highs for the move and were due for a correction. He thinks even if the 5,400 head beef plant saw a shutdown it would be short lived and there is enough open capacity in the packing industry right now to easily absorb the loss.
Higher Cash Pulls Futures Back Up
The big gains in the futures are also tied to higher cash trade and producers lifting their short hedges. Varilek says on Thursday afternoon packers tried to low ball bid at $238 which was passed and by the end of the day they bought cattle at $241 live. The bids are now up to $242 which implies higher cash when the dust settles.
Spring Rally Coming
Varilek says despite some temporary corrections in the futures market he is fully expecting the futures to have their normal spring rally. It will get an extra push this year from cattle supplies getting into the tightest numbers in the cycle.
Argentina Beef Imports to Rise
The U.S. and Argentina also announced a trade deal on Thursday that includes more beef imports. Argentina’s quota will rise from 20,000 MT to 100,000 MT. However, Varilek says this is still a small amount and won’t have much impact on supplies or market prices. He says the bigger concern and impact comes from Brazilian imports.
Heifer Retention and Beef on Dairy
Varilek says longer term he is expecting the cattle herd to start a slow rebuild. While inventory was down .4% and beef cow numbers were down 1% in the USDA report. There was a hint of heifer retention starting to show up and so he is watching that for signs of expansion and bigger beef supplies.
Meanwhile, the number of milk cows was up 2% year over year and speaks to the push for more beef on dairy. Producers have been retaining more cows because they can sex the semen and create another revenue stream by using even cows they would normally cull to carry those valuable calves. Wet calves are selling for upwards of $1,500 and there are many dairy operations that can sex the semen to create more bull calves that they feed out themselves to sell.
Hogs Rebound With Cattle
Lean hogs futures were down yesterday with cattle and saw some profit taking after new contract highs were scored on Wednesday. The market continues to be bought by the funds on breaks and the summer months are being supported by disease and the lack of isowean pigs available. Plus, those isowean prices have jumped well over $100. The summer month futures getting above $110 chart resistance was clearly a signal to the funds to keep buying.
Soybeans Make New Highs For the Move
Soybean futures made new highs for the move again Friday morning with continued fund buying. The market is still trying to price in the additional 294 million bu. of soybeans that China could possibly buy. However, Varilek is skeptical it will happen so he is recommending producers use the rally to make some sales.
Corn Fails at Resistance
Even with the big rally in soybeans this week of over 50-cents the corn market has barely budged and hit chart resistance in the March around the $4.25 area and failed. Varilek says farmers are also selling at those levels trying to chew through this massive 2.2 billion bu. plus carryover. So, he is not optimistic about corn taking out overhead chart areas to produce a more sustained rally.
