Grains start mixed Monday morning with soybeans higher, feed grains lower. However, cattle and hogs are both extending Friday’s gains.
Brad Kooima, Kooima Kooima Varilek, says cattle are seeing followthrough buying and strength Monday morning as the S&P 500 continues to stabilize and recover after the tariff delays.
Cattle are nearly 87% correlated to the stock market according to Kooima.
So can cattle continue to recover with the stock market or will funds use the strength to liquidate their long position?
Funds or managed money are still long in the live cattle around 118,500 contracts, but shed over 24,000 contracts as of last Tuesday and likely more on Wednesday.
So, Kooima says he’s got one eye on the macroeconomic data and the stock market at all times and can’t say for sure the recovery will hold just yet.
However, he is more optimistic about cash cattle trade this week holding at least steady as packers are buying for a long week next week after the holiday shortened week this week.
Plus, showlists are tight in the North.
Last week the South traded mostly $204, down $4 with the North dressed at $328, down $9 and live prices mostly $208.
Kooima is also more bullish about the cash market making new highs in May as the best demand period of the year kicks in.
However, that doesn’t mean the steep discounts the futures are holding will change.
USDA’s Cattle on Feed Report is scheduled for Thursday and he expects higher placements in the South as the flow of Mexican cattle has starting to increase slightly.
Lean hogs ended higher last week, brushing off China tariff news as they have been less of a factor than Mexico in the export market.
Seasonally, Kooima says hogs are usually strong during April and there may be traders buying hogs as they see that meat as more “recession proof,”
However, he is concerned the cutout values have not responded better.
Grains all had higher weekly closes as well last week with tariffs being delayed.
Soybeans were the strongest, which Kooima says is a head scratcher with the dependence of the market on China.
However, it is a new crop soybean story and he thinks the news of increased blending levels for biofuels in the RFS and lower acres may be providing support.
Meanwhile, corn is seeing some light consolidation with the lower wheat market and with contracts hitting the 62% retracement level.
