Livestock are higher Monday morning with corn and wheat trying to hold gains and soybeans lower.
Cattle Bounce After Holding Support and a Wild NWS Ride on Friday
Cattle futures are higher on Monday after a volatile session on Friday.
Joe Kooima, Kooima Kooima Varilek says the futures plunged with feeders touching limit down after around 10:00 am Central Time.
The selloff came on fears of USDA Secretary Brooke Rollins announcing the reopening of the Southern border to Mexican cattle imports while at at the ground breaking of the new sterile fly facility in Texas to curb NWS.
When Rollins didn’t announce a reopening the market quickly rebounded he says. “I still think it’s kind of an AI generated program that caught Rollins speaking at 11:00 am.”
The good news is the market found good support at $243 on June live cattle, a mark that is being eyed by fund and algorithm traders.
“So we did hold that which was nice to see so found some support. When you have a market that is that overbought for that long unfortunately your sell-offs can be kind of pent up to a certain degree,” he explains.
Rollins in Arizona This Friday
Rollins is expected to be in Arizona this Friday and so he is fearful it could produce the same type of volatile action in the cattle market.
“You know, I thought I had heard her say we’re not going to do anything unless we can get some of those cases further away from any border of the U.S. But I’m unfortunately I’m fearful the market’s going to have a little bit of a leery feel on Friday.”
He adds the numbers coming through the border may be much smaller than feared after the border has been closed for a year now.
“The traders they just like to feed off of those headline and unfortunately we just can’t put that to rest until we get some kind of a hard headline basically with it but that’s who knows what she’s going to say but the market’s going to be anticipating or maybe not even anticipating just trading that the fact that she’s there on Friday again,” he says.
Cattle on Feed Friendly
The USDA Cattle on Feed Report was friendly with the on feed number at 99.5% of a year ago, placements at 92.7% and marketings at 94.5%.
The placements number was the second lowest for March since the series began in 1996, so bullish overall.
He says, “This is basically this is going to calm the market down a little bit from Friday’s episodes and basically say hey we still have a generally historically tight supply here for a while now. So that’s the basic take-home message. The on feed there’s nothing huge in it you see the numbers continuing to grow in the North which is not a huge surprise we have the feed around here we grow.
The steer to heifer quarterly breakout showed steers at 63% of the total and heifers the balance, down 1%.
Kooima says the data backs that up but the drought map may change that.
“It’s like a slow progression like this whole cycle has been going on here the last few years anyway. So that’s just the progression of the heifer retention moving forward too and how we’re going to rebuild this herd it’s just going to be awfully slow. So, yes a little bit is happening but it’s not happening in the places where it needs to happen,” he adds.
Cash Market Steady
The cash market was mostly steady at $248 and $388 dressed.
At first glance that is disappointing but Kooima says, “However, I’m going to twist that a little bit because we, yeah, $248 happening there late Thursday, then $248 at the beginning of the market on Friday as well. And there’s a. point there here at least in the North where they actually pulled that $248.”
Then the packers came back in after lunch and renewed bids at $248 and feed lots regained their leverage even with the break in the futures.
“So some of the guys that passed the $248 in the morning were feeling a little bit oh no we missed what happened here but they were luckily able to get that towards the end of the day. So, it’s kind of one of those psychological yes $248 wasn’t the best but it came after the huge collapse in the futures which tells you the numbers are tight,” he says.
Is the High In the Cattle Market?
Still there are many in the trade saying the highs are in on the futures as confirmed by last week’s lower weekly closes.
So the market, according to Kooima, will need some bullish news in the form of higher cash to retest or take out those record highs scored last Tuesday.
The other key will be whether or not beef demand stays strong.
Is Beef Demand Holding?
Kooima says that is a tough subject but he says some of the higher priced cuts have been coming down in price while ground beef has been slowly grinding higher.
“The basic principle of demand is that if you have a product, you keep inching up that price higher and higher and higher because it’s moving. It’s moving. You’re going to retract the prices when you see the lack of movement. Two weeks ago, we had ground beef at all times high, which would tell you that things are great but last week we did have to backpedal just a little bit,” he explains.
That tells him that there is some push back especially as this is the best time of the year for demand.
“How I view it is that we’ve maybe reached a price point now where these consumers are trading down proteins,” he adds.
Hogs Bounce But Can They Hold?
Lean hog futures are higher after nine lower sessions and new lows for the move. So will the bounce hold?
Kooima says, “When I write down the product, the cutout level every day in the cash, Friday, it jumped out a little bit more that, okay, You have the cutout closing over 99 cents late Friday. And you have June. within a few dollars of it. July and August have a little bit of a premium, but where is our premium for these summer months? Historically, we always go into tighter numbers, just even on a normal year. But this year we’re dealing with all that disease issues. So I guess I’m going to look at a price point better than where we’re at right now. Where’s our premium? Let’s get those premiums back in those summer months.”
He says chart wise the market finished a three-wave theory to the downside.
“The first break was about $7 back a few months ago. Middle break was about $9, and this last one was about $7 as well. So hopefully we’re seeing a little bit of a technical action here where we can push this market up a little bit.”
He says the key is for slaughter to start slowing down and responding to the increase in disease being reported.
His theory is when disease hit six to eight months ago the large players did a great job of backfilling with Canadian isoweans.
Corn, Wheat Higher and Soybeans Lower
Grain markets continue to see wheat pulling up the corn due to weather concerns in hard red winter wheat areas ranging from drought to frost over the weekend.
However, corn may have a difficult time building on last week’s higher week as planter get rolling.
Plus, Kooima says with last week’s peace talks with Iran the funds decided to blow out of a good chunk of their long position.
“You know, they got out of quite a bit, 50, 60,000 on both sides of the beans and the corn. So, but yeah, it’s a big, long growing season
here in front of us,” he says.
However, if crude oil prices stay high it will lead to inflation which may bring some funds back into buy the grains.
“I think that’s part of their backbone of purchasing the grains the way that they have. And they just respectfully got out of some positions last week, because, yeah, when you see the crude oil have $10, $12 down days, too, you certainly want to lighten up the load a little bit. But inflation is for real. It’s maybe not as big as what people anticipate, but every month one that comes out, it’s higher than a year ago. If crude oil stays elevated the way that it is, we know how long that takes to finally trickle down into the gasoline prices anyway. So then inflation to me is pretty real,” he explains.
