Cattle started off lower on Friday with grain and hog futures higher.
Cattle Weaker Ahead of Cattle on Feed
Live and feeder cattle futures were weaker to start Friday as the market was seeing some profit taking and caution ahead of the USDA Cattle on Feed Report. Scott Varilek with Kooima Kooima Varilek says the reason is even though the placement estimate is at 93% of a year ago the market could get a surprise. He says this report will finally compare to a time period when the border was closed to Mexican feeder cattle imports. As a result, some of the Southern cattle groups are putting out pre-report estimates that are much higher than a year ago on placements. On feed estimates are at 96.8% and marketing at 101.5%.
Quarterly Breakout
The USDA report will also show the quarterly breakdown of steers and heifers in feedlots and Varilek says based on conversations he’s had with auction barns, he is anticipating it will show that there is heifer retention that is starting to take place.
Can Higher Cash Trade Win the Day?
Cash trade has been quiet so far this week and bids of $232 were passed on by producers in the North on Thursday, so that may indicate a higher week of cash is in order. Boxed beef values have been moving higher and the Choice cutouts were up another $1.34 on Thursday afternoon at $367.45. Packers have cut kills to 32 hours which has helped prop up values. While demand isn’t on fire this time of year, Varilek says it is still solid.
Weather Curbing Weights
The massive winter storm and bitterly cold weather will likely curb performance in feedlots, but Varilek says with weights at record levels the slow down in gains may help keep producers more current on their marketings.
Lean Hogs Make More Contract Highs
Lean hog futures continue to crack out contract highs in the April through deeper deferred months. The Lean Hog Index has continued to rise with the latest print up $.67 but Varilek says the summer months are pricing in disease issues that are emerging in large production areas. He thinks pushing above $110 is very likely in the summer hog futures.
Grains Rally on Exports and Weather
Grains futures were higher as well with the market reacting to strong weekly exports and weather. Corn exports were a marketing year high at 157.9 million bu., soybeans were also a marketing year high at 89.9 million bu. and wheat was strong at 22.7 million bu. South American weather is also looking hot and dry for parts of Argentina and Southern Brazil which has traders adding some weather premium to soybeans and maybe even corn, while the the wheat market is pricing in some concerns about winter kill with the below freezing temperatures.
Still, Varilek is attributing more of the bounce to technical buying after the markets are on the mend following the selloff in reaction to the bearish USDA reports. He says the corn and soybean markets are still trading within their ranges and he doesn’t see a reason for them to break out.
