Cattle futures continue to make new near-term highs on any pullback. However, February and April live cattle contracts are running up into chart resistance and might be due for some sort of correction.
Are the markets too bullish heading into the USDA Cattle on Feed Report? Scott Varilek, Kooima Kooima Varilek, says he is still bullish but being a little cautious. Trade guesses for placements are at around 88% due to the harsh winter weather conditions in January. Some of that is already being priced into the market he says.
Cash trade news has been quiet says Varilek. The packers have been slowing chain speeds to prop up their margins and buy less cattle at higher prices and this week the total slaughter may fall below 600,000 head. “The packers right now have the leverage,” he says. They are buying hand to mouth and what they are buying is being picked up right away.
Hogs also make for the move highs pushed by cash. Varilek says, “That cash situation turned in a hurry as we had too many hogs for quite some time and now the packers are chasing the market which is propping up cash.” The futures took out some resistance areas on the charts and he says the summer contract are getting close to $100 which may be a hedging opportunity.
Corn bounces off another contract low early following wheat, which is putting in some risk premium and seeing technical buying. However, the corn market has continued to be capped by farmer selling on any rally.
Soybeans are under pressure again due to more favorable weather in South America with rains in Argentina being added back to the forecast.
