Cattle end lower for a second day still digesting news that China was delisting beef from the JBS plant in Greeley, Colorado, due to traces of ractopamine.
However, Scott Varilek, Kooima Kooima Varilek, says this caused algorithm selling pressure on Wednesday and there was follow through selling Thursday.
However, he says, “The markets were overbought and in need of a correction.” Plus, the pullback coincided with end of month and sparked some fund or speculative profit taking.
Coming off a week of record cash the bulls were confident in another week of higher money only to be upset by the break in the futures. Varilek says cash cattle trade has been light but a bit lower at $186 in the South, but there have also been some reports of $191 in the North on Thursday.
Varilek is optimistic the futures will recover with the big discount the board has to cash and that has been supportive.
Lean hog futures finally bounce after making more new lows for the move in several contracts. The market is seeing short covering as the market is oversold. Plus, there was some spread unwinding with cattle. However, Varilek isn’t ready to call a bottom
Grains end lower on end of month profit taking, risk off outside markets, plus technical and fund selling.
The markets were also removing weather premium but is this topping action?
Varilek says the wheat market looks like it’s put in a top as its priced in the global weather and production concerns, at least for now.
Without the help of the wheat market, he thinks it will also be tough for corn and soybeans to rally.
With the planting progress at or ahead of normal and the Drought Monitor showing decreasing drought in the U.S. the trade mentality is “rain makes grain” until the next weather scare.
Plus, he says technically July corn closed below several key moving averages.
