Cattle futures try to rally early with some short covering after a lower day yesterday and heading into the week.
However, Scott Varilek, Kooima Kooima Varilek, says the cattle market participants, both fund traders and producers, lack buying confidence due to bird flu news. “Open interest on the cattle has fallen below 300,000 which I watch because when volume goes above those levels its more bullish,” he states.
He says the problem is the market continues to be concerned about bird flu news. The mainstream national media is trying to sensationalize the bird flu story and the fear is that will hurt consumer demand for beef.
At the same time the cash news on fed cattle is still positive but light with $187 in the North and $186 on some in Kansas. “I think we could develop at $187 or higher on the volume as some producers are holding out for $190,” he says.
Packers have been trying to spook the market with talk of kill cuts with Tyson talking about 32 hours slaughter weeks and they are also trying to boost boxed beef prices with Choice right around $295.
Weights are still a problem, down 3 pounds on steers for the week, but those weights are still well over a year ago.
Hogs try to bounce but continue to be held back by the futures premium to the Lean Hog Index. Technically the market also fell below key support.
Grains higher led by wheat on production concerns and weather in the Black Sea region which is helping to support corn and soybeans.
However, can the gains hold into a potentially bearish WASDE? If they do Varilek says the grain market could continue to rally. However, U.S. ending stocks are expected to build from last year on the new crop and there is skepticism whether or not USDA will adjust the South American numbers downward much.
