Cattle futures were slightly higher early Friday, hogs and soybeans 2-sided. Corn and wheat lower.
Cattle Trying to Bottom?
Live and feeder cattle futures were slightly higher early Friday extending the recovery off the border reopening lows.
So is the market trying to bottom?
Scott Varilek with Kooima Kooima Varilek says, “Mexican border news was big, big news. I mean, it’s been closed for, you know, what, a year and a half almost two years and what did that mean to this rally. I mean we rallied some because of it so naturally some of this cherry on top has to come off because of it,” he says.
The market bounced off key and long term support areas on the charts but there are still lingering chart gaps that may need to be filled below the current market. So while the market is trying to heal it is too early to call a bottom he says.
“We’ve been beat up so bad. We’ve broke a long ways, and now we’ve rallied some. I think the bulls are scared. I think the bears are scared. And we’ve got month end, and nobody’s real sure where to be. I have to talk out of both sides of my mouth but for me, I’m still feeling like the high is in. We’re still holding some of these long-term charts. Maybe a little recovery here, but more tough maybe yet.”
Uncertainty with Border Reopening
There is still uncertainty about what it means for the market as Douglas, Ariz. will be the first port to open and is the second largest in terms of traffic two years ago. The largest port is in Santa Teresa and that will be one of the next to open.
“We’ve all talked about how we won’t get flooded because they figured out how to feed them and kill them and do all of that but my thought is is we know what the cash feeder prices are doing up here and I think these Texas feed yards are going to bid pretty hard and money’s going to talk they’re going to try to pull some of them up,” he explains.
So that will fix some of the tight supply issues.
Cash Trade Needs to Improve First
Despite the technicals, the market fundamentally needs help from the cash market.
He says, “The cash market does need to hold. I mean it’s held for this week. Now when I look at the calendar I’m not in love with where we sit
in the time of year, July 31. You can get a little boost for some Labor Day buying, you know, right here in the beginning of August. So I’m advising take advantage of that.”
There was some Northern trade at $235 and $233.
“Not everybody’s getting the $235, but guys that are, are taking it. We’re selling some. So I think that’s okay. You know, if I had some cattle that I’m wondering when I get them on the show list, I’m trying to gun for the next week or two here, trying to get, you know, some of those prices while it’s good because end of August, beginning of September gets pretty sloppy and I’m not in love with where our demand sits. And I don’t think the pack will be as aggressive there,” he adds.
The South has been quiet with just a few sales early in the week at $231 to $232.
Death and Weight Loss Tied To Heat
There have been report this week of death loss and weight loss tied to the extreme heat in cattle feeding areas from North to South.
Varilek says its difficult to get a handle on the total losses but there are some train wrecks in a few lot.
“You can hear kind of the same horror stories from all across our customer group. So, it was a tough week just didn’t cool it down enough at night to let that animal cool all the way down,” he describes.
So there’s there’s some pretty big numbers he adds and it will mean lower weights, but it won’t have a big impact on the market and he’s hoping the leverage can swing back to the producers after the heat dissipates.
Fall Feeder Run
The next thing he’s watching is the number for the fall feeder run and he’s getting conflicting stories.
“When a market does break and tops like this, we’ve got some negative numbers on the board. We’re well off the highs. It does bring a lot of
those phones start ringing. Hey, I’ve got some cattle for sale and everybody’s trying to move some feeders that may be missed out on the highs. And rightfully so. So I think that the videos were off on numbers a little bit, had some great prices, but I still think that this fall feeder run is going to be sizable enough,” he says.
Add the Mexican numbers on top of it that and there will be plenty to choose from. “But those prices are going to have to be the leader. Feeders are going to have to lead us out of here if we’re going to do it. And my gut right now is trying to say that we’re going to have some pretty decent feeder runs. Our supply is not totally fixed. But I think there’s going to be enough to choose from,” he adds.
Fort Morgan Vote Next Week
Meanwhile, the union at the Cargill plant in Fort Morgan, CO is voting on a labor settlement next week and could reopen in the weeks following.
The market saw little impact when the plant was dark, so will it care when it comes back online?
Varilek says, “It’s friendly to absolutely get another plant online. I mean we’re talking about losing leverage from the packer well that helps us get some leverage back.”
It has been sitting idle for several weeks and will take a while to get restarted but he’s hopeful it will provide the cash boost the market needs.
“It’s at least offsetting some of this Mexican border news here.”
Hogs Try to Bounce After a Beating
Hogs opened lower Friday morning and were trying to recover after huge profit taking losses the last two days.
Can the market recover or is there more liquidation coming?
He says, “That’s a good question. I think we’re all trying to figure out why we had to break so hard in two days and open interest just gets smashed. So it almost just smells like somebody big really had to smash this.”
The market had a good rally and was overbought and may have seen some end of month profit taking or some hedge pressure.
“We did find some prices Dec, Feb on back that started to look appealing,” he says.
There was a story that there were some plants that sent hams to Mexico without the bones cut out and those may have been rejected but he’s not sure that would break the market.
So far Friday the market was holding support areas on the charts.
Corn, Wheat Fall Friday with Soybeans Holding
Corn and wheat were seeing pressure on Friday after both markets failed to hold rallies yesterday.
Varilek says wheat was dragging down the corn market because even with rains overnight in parts of the Western Corn Belt, there was some big areas that were disappointed in the totals.
Soybeans held support on that news as well but also got help from a 9.3 million bu. flash sale to unknown.
“When you get the wheat down 20. Corn is going to suffer because of it. So that just tells me corn doesn’t have enough of a story to stand on its own. You know, our demand has been pretty good at some of these levels. We’re moving some corn. I feel good there. So I think we’ve got a pretty firm floor. World ending stocks are tighter. So I don’t think that we’re in the mood to have a wreck,” he says.
Still he thinks with the break in the grains this week the market is starting to anticipate harvest and is seeing early harvest pressure.
