Corn, soybeans and cattle are higher early Friday, with lean hogs slightly lower.
Scott Varilek with Kooima Kooima Varilek says live and feeder cattle futures are higher again on Friday morning with the third day of recovery after Tuesday’s melt down.
What Broke the Cattle Futures Tuesday?
Varilek says there wasn’t any big fundamental news that broke the cattle market on Tuesday, despite talk of the annual Jobs report being the catalyst.
“I think money flow was a big part of it. When you are at these high price levels you just get these type of corrections and funds liquidate. Then cattle feeders chase the market to lock in prices and it just snowballs,” he says.
Both live and feeder cattle futures did take out long term technical support at the 20-day moving averages and sell stops were hit under those chart areas.
Can the Market Retest the Highs?
The fundamental tightness of cattle supplies would suggest the market could retest the record highs, especially as cow slaughter is still down about 36% from a year ago.
However, Varilek says technically the futures will need to close above Thursday’s highs to accomplish that.
“I am watching that $235.75 area on December cattle technically. We need a close above that level to continue to heal this market,” he says.
Can the Market Recover With Lower Fed Cash?
Live cattle futures have been very resilient in the face of lower fed cash trade so far this week.
The South has been in the $240 area on a live sale basis, with some light trade Thursday in Kansas at $238, down $4 from last week, but there is not enough volume for an adequate test.
The North has been quiet with USDA reporting some dressed prices at mostly $375-$378, down $5 to $8, but Varilek says there was a handful of live sales at $237 early but lower live bids at $236 are being passed.
Cash Feeder Market Providing the Biggest Direction
Varilek says for him the cash feeder market is the real leader and after a wobbly start to the week it’s firming up at sale barns.
“The last few days they’ve kind of it feels like they’ve found their footing again here. “Feeder are the leaders and I am leaning on them for direction,” he says.
Can Lean Hogs Climb Above $100?
Lean hog futures consolidated early Friday after more new contract highs were hit in the nearby contracts on Thursday.
However, funds have been buying the futures on breaks and that was the case again Friday.
So, Varilek says it is possible the October could get above the $100 level.
“It has exceeded my expectations. I mean, we’ve had this tighter supply. We had the disease issues last spring that just kept lingering and that’s still that we’re still in that hangover apart from that.” he adds.
Corn and Soybeans Higher Expecting Lower Yields
Corn and soybean futures are slightly higher to start Friday awaiting confirmation of lower yields in the WASDE.
Yield reports are indicating lower results than a year ago, but Varilek says he isn’t sure if USDA will be ready to acknowledge that in this report.
“I am not sure the market will believe it if USDA doesn’t lower yields, just because of the harvest reports we are getting from farmers,” he says.
