Can Cattle Hold a Rally? Fund Buy Hogs but Sell Grains with Improved Planting Weather
Markets Now Early Markets 4-9-24
Cattle seeing an early rally, but can they hold it or will funds sell that strength? Joe Kooima of Kooima Kooima Varilek says it will be difficult with the funds losing confidence in the market and open interest is declining which reflects that.
He says there are also other fundamentals that need to turn around to support a rally, including cash trade stabilizing after the recent slide. Kooima expects cash to be down $1 to $2 dollars this week and there were some early bids in the South on Monday at $180, which were obviously passed on.
Carcass weights also need to moderate. "Steer weights are 25 pounds over a year ago due to the mild weather and that is a negative for the market," he says.
Packers will continue to cut kill hours this week according to Kooima. He says the slower chain speeds are what helped push boxed beef values sharply higher on Monday.
He says speculative money is also shifting out of cattle into hogs and the funds have pushed futures to new contract highs again Tuesday. "If you look at the open interest yesterday it was up compared to cattle which is a good indication of the shift," adds Kooima.
Fundamentally, cutouts have also pushed above $100, cash trade has been strong and isowean prices have shot up the last couple of weeks which is also a good indication of strong underlying demand.
The lean hog futures are getting overbought, however, and Kooima says they may be due for a correction.
Grains set back early Tuesday on favorable planting weather with an open window and farmers anxious to hit the fields. Additionally, corn and soybean futures could not take out chart resistance levels again on Monday and are retracing below those levels.
Kooima says grain markets will need a weather problem or some big pickup in demand to give funds the news they need to buy and push over those chart levels. However, he points out that even the 4.6-million-bushel flash sale of soybeans to unknown destinations on Tuesday morning failed to be noticed by the trade.
