Cattle, corn and soybeans higher Friday, with hogs lower.
Feeders Hit Record Highs, How High Will Prices Go?
Live cattle and feeder cattle futures were higher on Friday’s open and quickly moved into record high territory.
Scott Varilek of Kooima Kooima Varilek says tight supplies and a record cash market have supported the move to new highs.
Feeder are back as the leaders in the complex but how high will prices go now that prices are back up into record highs?
He says, “It does feel like, okay, live cattle had already made their contract highs. Feeders were next. So, what numbers can we grab? I’ve heard the $380. I’ve heard the $390. I’ve heard the $400. We’re all just reaching, making up numbers that we can. We’ve already seen eight weights spring $400 in sale barns in the North. So it’s not something out of the ordinary that can’t happen. So once we bust through, it feels like, yeah, they have the legs to do it.”
He stresses that this could be the last higher push for a while.
“We’re going to want to be ready for it. I think this is our last charge higher. I guess it’s feeling like we’re getting towards the ninth inning of this. I think we’ve probably heard that a few times, but this is a rally that is going to be the one that’s going to be the one that we’re going to want to sell, I guess. So the chance to get to $4 is there. It really could happen,” he adds.
Live Cattle Hit Record Highs First
Live cattle had already hit record highs earlier in the week and took out those levels again on Friday.
The market says some end of month profit taking Thursday but charged back higher Friday morning chasing cash.
Record cash trade broke already on Tuesday at $11, $12 higher than last week at $258 in the North, $255 to $256 in the South.
He says it caught the market by surprise, “I mean, that’s not something that’s normal. And it’s odd because when we were getting bid the $246, And the market wasn’t trading as hot as it was. I think the packers could have just went to $248 and bought all of the show lists and bought all
of the cattle. The fact that they waited another week, was it a shoot, you caught me bluffing move? Or was there somebody that’s really long, this board that wanted it to go higher? I don’t know and we won’t know. But regardless. Big charge higher, $12.”
He says bids started Tuesday at $250 and quickly went to $252 and then to $255.
“I thought that would do it. And then was just surprised when I started hearing that everybody was passing it and then get to $258, which a lot of people did get that and did trade that. You could get it for shorter. You could get two over the August for basis contracts. So, the packer was trying to get as many cattle around them as they can. And I would believe that everything on the show list, if you’re passing that kind of price, I don’t know what you’re waiting for,” he adds.
He hasn’t seen anything like it since 2014 but it was a big inventory grab and packers bought for delayed delivery as well.
Packers Buy Ahead of Kill Cuts
Packers were aggressively getting inventory as they are talking about kill cuts starting next week.
“Just hearing that there’s some majors that are going to start kill cuts next week, start to slow down the chain. And I mean, it’s just, it’s how tight we are. In this cattle industry, we’re, you know, 8% down, 8 to 9% down on steer to heifer slaughter this year. Cow slaughter is way down. Dairy cow slaughter is down. It’s just there’s still a shortage. So this last little push is all on supply, in my opinion. And I think that’s how the packer is trying to manage it,” he explains.
He says they are cutting kills to get boxed beef to move higher and improve their margins and the industry is still down a plant from a strike.
How High Will Live Cattle Futures Run?
Live cattle have continued to push into record high areas but how high will prices go?
Varilek says it is hard to even project because there are no technical areas on the charts to even compare to now.
“You’re up in new territory. You’re just grabbing, you know whatever number comes to your mind somebody wants to say a really high number so they can get remembered. I would rather try to do you guys some good rather than just make up a number up high and try to throw it to you that’s just that’s all made up,” he adds.
But he does say it depends not just on supply but demand.
“For me it’s just that this demand is going to have to pick up if we’re going to keep these live cattle running through and that’s the part that’s seeming to be just a little bit lacking. Seeing mixed feelings on what these steak cuts are doing. You know, the ribeye rolls are down. Usually we’re trying to, you know, see how high we can get those or how much a consumer is going to pay for them this time of year in the red hot grilling season, Mother’s Day weekend coming up and we’re actually dropping them a little bit. So I don’t like that,” he further explains.
Plus, he says with energy prices soaring it is hitting consumer pocketbooks which could also ratchet back demand.
Hogs Fall on Iowa Pseudorabies Case
Lean hog futures were down on Thursday and again Friday with the uncertainty tied to the first case of pseudorabies in a hog herd in Iowa since 2004.
“So it’s five boars that were shipped, you know, were. tested positive and some were shipped from Texas to Iowa. So sounding like it was show pigs, not sure. Can’t totally confirm that, but that would make sense on how that happened,” he says.
However, the disease is manageable according to Varilek.
“So we have vaccination capabilities already, protocol in place. So, for me it’s okay I think we’re going to be able to eradicate this once again and make this a short-lived kind of a worry here because it it is something that that’s real and I mean it’s something that can have you know
they could be dead within 48 to 72 hours. Hogs are a great host likely mixed with some feral hogs so it is around.”
Is it Bullish or Bearish?
Varilek says it does severely cut production which takes supply off the market which is bullish.
However, it is still a market uncertainty.
“So uncertainty is always bearish. Packers are trying to note some certain timeframes where they would kill hogs with pseudo rabies. So they were still entering, you know. you know, the meat supply. We weren’t worried about it back then. So because they had windows where you could slaughter those hogs. So a lot to digest here real fast. Everybody’s Googling pseudorabies and trying to learn as much as they can here real fast,” he adds.
Nov Soybeans Hit Contract Highs, Corn Also Higher
Corn and soybeans were higher early with November soybeans making new contract highs.
Varilek soybeans are following the new contract highs in bean oil.
“That seems to be the biggest thing, just the energy is staying so strong. And that’s making a lot of the headlines, the war. and how high crude oil is. So, I think that those markets are starting to respect that. I mean from a production side yeah you said more acres we’re seeing a little bit of replant we’ve got some frost. Which usually those rallies that are based off of frost and replant those are rallies that are meant to be sold. But I don’t think that that’s all of this I do think it’s energy,” he states.
Can Dec Corn Get Above $5?
Corn is also higher on the biofuels push with strong ethanol margins and profits.
With $100 crude oil corn could stay supported for a while and chew through some of the large ending stocks.
So will Dec corn get above $5?
Varilek says, “So we’ve got a bar right there, $5. We’ve seen it fail there a few times. Now I think if you just poke through it. I think you’re going to get some follow through strength on it just because it’s been such a number. Oh, that looks easy. Just sell it right below five bucks here and let it break. But those triple tops never hold, they kind of say. So I feel like we’re going to be able to get through it and might get some follow
through.”
He adds that the funds are long corn and the news may finally be good enough to rally the corn and grain markets.
