Cattle and hogs are higher early Friday, with grains mixed.
Cattle Extend Rally Despite Lower Equities
Live and especially feeder cattle futures are seeing follow through buying and a strong rally despite lower equity markets and higher energy prices, which are usually negative for the market.
Joe Kooima with Kooima Kooima Varilek says the ability of the cattle market to divorce itself from the outside markets the last two sessions has been very impressive.
“We had a really good finish yesterday and that’s kind of setting the stage for today. We’re having a fantastic start. Feeders are up $4.50, fats up $2 or more. You’re still having an outside market that’s a little bit clunky, a little bit squirrely here, especially on a Friday going into a weekend. We don’t know what’s going to happen with any war escalation or anything like that. So I’m highly impressed with the cattle action so far. And I’m glad that we can finally have a little bit of a divorce between the two and maybe look at
some fundamentals that could be coming around the corner there.”
Steady Cash Supportive
Thursday the fed cash market started to develop at steady money so that is likely supporting the futures he says.
“Yeah, I would call yesterday a big victory. We look at the last couple of weeks, our kills were light. Like yesterday was just 96,000. Last week’s kill was like 508,000 or something like that. It’s great to see because we’re worried about you know how big these cattle are, we’re worried about the last couple weeks we’ve carried some cattle into the next week because we didn’t sell as much. Yet you’re seeing a market that is holding,” he says.
Cash bids on Friday were also holding steady with Thursday’s cash trade at mostly $235 in the North with dressed prices at $370 to $372 and a few in Texas at $234.
Kooima says, “The packers got a little bit of an appetite here and the producers can kind of smell it. So futures are responding pretty well. So this leverage hopefully is shifting back into the producers hands right now.”
Futures Absorb Lower Boxed Beef
The futures are also holding despite the drop in boxed beef values the last few days and he thinks the market will continue to shake it off.
“I think we can. The relationship between the boxes and cash in the last several years has always been tough to tie the two together. You’re having cattle that are on feed a little bit longer. Our grading is the highest it’s ever been. So part of the equation there too is like, hey, we’re probably swimming in a lot of prime and a lot of choice product out there that’s having maybe a tough time having a lot of movement at the prices there. But I look at the calendar. We’re a few weeks out from having a big spring demand push. Maybe these packers just had to back it up. The price level is just to get a little bit better start on the price and not have such a high price going into a big spring demand event because basically these boxes are the highest they ever have ever been if we take out that COVID year.”
Technical Breakout in Cattle
Cattle futures also had a technical breakout this week according to Kooima.
“We kind of broke out to the top side at the beginning of the week, and the feeders took out their down, just a smaller downtrend line. The cash market continues to be hot there as well, and the fat cattle followed there as well, took out a small term downtrend line you have a little bit of a wedge of formation happening in so you’re getting some technical buying upon that and if you measure you know that that nice technical outbreak that we had at the beginning of the week it’s almost looking like we can go back, fill that gap that we left a couple months ago so you’re looking at that $240, $239 marker for like June,” he explains.
Greeley Still on Strike
Kooima says workers at the JBS beef plant in Greeley, CO are still on strike but non-union workers have been slaughtering about 400 to 500 head daily.
“They’ll actually be selling some boxes out of there next week so not enough to really you know matter a whole lot but hey if they’re dropping some blood over there maybe some maybe we’re closer to seeing some kind of a negotiation moving forward too,”
Hogs and Pigs Report Friendly
Hogs are mostly higher on Friday with a push from a friendly USDA Quarterly Hogs and Pigs Report compared to expectations with the All hogs and pigs number at 100.4%, kept for breeding at 98.5% and kept for marketing at 100.6%.
“We came back a percent less and majority of the numbers there. And you’re having that into a break of $8 on the board here too. So it’s kind of a good timing aspect for it as well. Does that hog and pig report show exactly what’s going on out there in the real world? It doesn’t reflect necessarily what I hear, but at least we had something to kind of hopefully switch this this quick downtrend that we have and that was a just nice timing overall.”
The 98.5% kept for breeding number was a well under expectations he says. “We’re going to be in a new landscape moving forward and you know what these operations are going to be looking at moving forward. You hear here a few sow barns here and there they’re
just old and the producers are just going to be moving on to something different there. So I think we’re a little bit into that phase,” he says.
USDA also did some revisions to past reports based on slaughter numbers and weights.
but it was actually down from the last quarter, wasn’t it? I believe so. I think there’s a few
When Will Disease Start Showing Up?
When will the reports start showing the marketing hole from disease problems?
Kooima says the disease issues are as bad or worse than in past years. “The prevalence on some of these, the PRRS and the PED. It’s been the highest, you know, some since 2018 for some PRRS issues. And the fourth quarter of last year for like PED was the highest it’s been since like 2023. So we’re talking about a very high benchmark.”
So he thought the disease problems would have already shown up in the form of tighter numbers. “But I think we filled a lot of those flows back, you know, six months ago when we had major disease issues from Canada. So I think that’s a little bit telling story of why
our kill numbers are maybe a little bit more than a year ago.”
Moving forward he’s hearing of packers killing Saturday kills in April which is friendly and indicates tighter numbers. The weights this week finally fell below last week and a year ago.
Funds Still Liquidating
Unfortunately, he says the funds are still liquidating in the hogs and indicated by the dropping open interest. “It was sitting at like 380,000 in the hog complex and I think we lost about 45,000 of that. So that’s one of the reasons why we saw such a big... downtrend here and cash and cutout have been sideways too. So you had a pretty big premium,” he adds.
Corn, Soybeans Under Pressure on Profit Taking
The corn and soybean markets are lower on Friday morning seeing profit taking heading into the weekend on fear of war developments. The market has also rallied anticipating the RVO levels being announced on Friday.
However, Kooima says the row crop markets are seeing buying on the pullbacks. So even if there is some buy the rumor, sell the fact reaction to the RVO announcement, he thinks the market will be well supported due to inflation concerns.
Inflationary Buying
Kooima says with rising energy prices that is fueling inflation concerns which is supportive of the grain markets.
“And I think that’s why you’re seeing the funds take on these little dips that we’ve seen this week. They’re building a long position. They have a nice long position ready, well over 200,000 for both corn and beans. And I think they’re looking to add to that on any kind of a
break there. So if we do have kind of a buy the rumor, sell the fact, I think it’s going to be met with some buying.”
Longer term he thinks higher oil prices will stay high due to the infrastructure damage in Iran and that will continue to support inflationary buying.
