Cattle futures started lower Tuesday but quickly bounced with hogs and grains mixed to lower.
Have Cattle Scored a Short Term Bottom?
Cattle futures ended well off session lows on Friday and were higher again on Monday seeing a technical bounce. Cattle started off lower Tuesday with some commercial selling, then quickly stabilized.
So have the cattle futures put in a short-term low?
Kyle Bumsted of Allendale, Inc. says, “The way we rallied off our lows here on Friday and the bounce we saw here on Monday, it does feel like we’ve put in some sort of a short -term low here or intermediate term, as you called it.”
He says there is some position squaring from non-commercials, he says, in day three of the Goldman roll. Preliminary open interest this morning showed that February live cattle is now the lead contract with the volume and the open interest so funds have been liquidating out of December live cattle quickly.
Cash Trade the Key
Cash trade will be the key to bottoming both the live and feeder cattle futures.
Bumsted says the feeder cattle cash index was down another $4.56 at $332.85 and could drop down into the $320 area before expiration and will then try to bounce.
Fed cash trade was sharply lower last week with the average price at $215.43, down $8.30 and again all of that volume reflected northern trade.
He says the cash pressure came in the north due to heavy weight cattle.
“Big cattle here in the north. That’s kind of what pressured it. But there were some packers coming out of Texas last week up to the north here and buying some cattle to ship south. So that tells me they need some cattle down there,” he says.
Cash This Week?
He thinks the fed cash market will be under pressure again this week in the north as producers are struggling to get feedlots current.
Early cash trends could be established on Tuesday as some of the regional sale barns in the north have auctions.
“So that could give us a decent little indication here. If that’s a little bit higher, then there could be some packers sniffing around looking for some cattle and that might help this market out. But if we’re lower again and the cattle are big, then we could be under some pressure again, at least here in the north again this week,” he adds.
With the high price to truck cattle he says some packers either have some orders to fill or there’s some that they’ve got some of their margin back with cheaper cattle and the boxed beef prices where they are.
Tyson to Add Second Shift at Amarillo
Part of the bounce in cattle futures on Monday was news Tyson is working with Allied Beef Company to put a second shift in at their Amarillo, Texas plant in summer of 2027.
Bumsted thought it was curious Tyson would share that news with their competition and he is skeptical since packers have taken over beef processing facilities in the past and not been successful.
However, he thinks the expanded chain speed will be helpful to the industry and producers.
“When they closed that Lexington plant, it did hurt us here in the north because that did get rid of a lot of cooler space. And there’s been talk of a lot of coolers that are full. So opening up another shift that tells me they’ve got some room down there potentially or there’s going to be some room here for them to put some cattle. But again, if it doesn’t happen till mid 2027. and you know we’ve got some time yet,” he says.
Longer term it could give producers some leverage back in the cash market.
Stock Market Push
Bumsted downplayed the influence of the stock market rally on Monday.
“There is some indirect correlation there. It doesn’t happen every day all the time. It’s kind of like feeders and corn, that correlation doesn’t always hold true. So some days it does hold, some days it doesn’t.”
USDA Baseline Projections
USDA released its baseline projections Monday as well and Bumsted says USDA is expecting prices to peak at $237.50 in 2027.
“I look for that to happen early in 2027. Then they’re looking at maybe lower prices here. They’ve got $222 in 2028, $211 in 2029 and $197 in 2030. So they’ve got the price of cash cattle moving lower here as we move into the next few years. So that’s definitely something here to really take into consideration if the government’s right.”
He also looked at what USDA is expecting for herd rebuilding but says it depends on moisture in the plains. “Inventory bottoms at 86.2 million head here this year and reaches 93.1 million head by 2036. Beef cows grow from 27.6 million head to 30.9 million head. So they’re looking at herd rebuilding starting here in 2027, which is possible,” he adds.
CPI and Beef Demand
CPI was out on Tuesday showing at .4% increase for the month, core was up .3% and it also showed higher beef prices. Is that limiting consumer demand?
Bumsted thinks consumers have seen sticker shock. “I think that when you look at it, we’ve added some more ribs to the small rib cuts to the push list. There’s more ground beef on the push list going out there. And so there’s a there’s a lot of beef being offered to the retailers right now. And I’m a little concerned yet that we’ve got that much beef here offered to our retailers and end users. But I still think that this the price of meat is still hurting the consumer.”
Hogs Still Searching for a Low
Lean hog futures were higher in the nearby contracts on Monday but were back under pressure on Tuesday.
What will it take to bottom the market or what is the signal of a bottom? Bumsted says he’s look for chart signals.
“I’m looking for somewhat of a technical reversal here, maybe some non-commercial short covering. These funds just keep piling into the short side, and it’s really, really hurting this thing. And I don’t see anything that’s going to turn it around just yet. I mean, you’ve got Dec hogs at $55. And at the rate this thing’s going, why wouldn’t February drop down there? And why wouldn’t April drop down there to $55 as well, too? Because that market is basically a hedge market.”
He says there are plenty of hogs around and the cash market has not bottomed. Negotiated cash is at six year lows.
Grains Await Report
Grains were chopping ahead of the USDA report and will also be watching the outcome of the Black Sea peace talks.
However, Bumsted thinks much of the bearish news has been priced into the corn and soybean markets with corn nearly $1.20 off the September highs. He is concerned the farmer still holds a great deal of corn inventory and when they finally transfer ownership to the commercials that is when the market tends to bottom.
