Cattle futures are higher early Friday, with hogs lower. Grains are quietly mixed.
Cattle Futures Higher Despite Lower Cash
Cattle futures are higher early Friday after seeing some profit taking the last couple of days unable to take out chart resistance, which in live cattle coincides with the 100-day moving average. As a result the market is trading more sideways says Scott Varilek, Kooima Kooima Varilek. However, futures are higher despite lower Northern cash trade on Thursday.
Lower Cash Cattle
Fed cash trade developed at $228 live, which is down $2 from last week but on limited volume says Varilek. The dressed prices were mostly $358, which is up $4 but that is equivalent to $225.50 on a live sale basis. He says the drop in the cash market is not unexpected considering packers were buying for a short holiday week. And that may be the case again next week.
Boxed Beef Not Rallying
Boxed beef values are still subdued which is a disappointment since they normally see a seasonal rally around the holidays. The Choice values are still under $360 at $357.28. Varilek thinks the poor performance is somewhat politically motivated. “Packers have been unwilling to push the beef values higher because of the target on their back regarding their role in higher beef prices,” he explains. He doesn’t think it is tied to poor consumer demand.
Cattle on Feed Positioning
The market has also been positioning ahead of the Cattle on Feed report due out at 2 pm on Friday. Early estimates put the on feed totals at 98.4% of a year ago and placements at 92%, which if confirmed would be bullish. Varilek says it just backs up the tight herd numbers. However, he thinks there is some slight heifer retention that is starting to take place.
Lean Hogs See Profit Taking
Lean hog futures were lower early Friday on pre-weekend profit taking and some spread action with cattle. However, the market is still in a short term uptrend which has attracted fund buying and that should continue. Disease problems are also growing in major production areas which should be supportive as well as the seasonal bottoming of the cash market.
Are Soybeans Done Going Down?
Soybeans are narrowly mixed early Friday after another week where futures lost over 25 cents. Varilek says the market is now trading below the price levels it was at before the China trade truce and purchase framework was announced. “We filled the chart gap areas and then closed below those levels which is bearish,” he points out. China bought another 4. 9 million bu. of soybeans Friday morning, but he thinks the soybean market has failed to respond to these sales because it’s not enough to hit USDA’s export target. Plus, Brazil and Argentina have been receiving good rains this week and so there is no problem with the South American crop.
Corn Hits Resistance
Corn has been resilient with the selloff in soybeans and tried to rally this week after holding the 100-day moving average. However, it failed at resistance on the charts at the 200-day moving average. Varilek thinks that keeps corn range bound through the end of the year or until the January WASDE.
