Cattle futures are higher early Monday, with hogs mixed and grain markets mostly lower.
Brad Kooima with Kooima Kooima Varilek says cattle futures gapped higher on the opening Monday morning, set back then rallied into new all-time highs again.
The futures market was pulled up by cash cattle trade, which continued to shatter previous records last week.
Cash trade developed in the South first and appreciated all the way through Friday.
Cash in the South settled out at mostly $230-$232 live, but got as high as $235 on Friday. The North traded $242 to $244 live on Friday as well, up $7 to $9 from the previous week.. Dressed prices were mostly $380, up $13.
Kooima thinks the packers are trying to get inventory lined up to get through the July 4 grilling season beef demand and that’s why they have been so aggressive.
He is watching slaughter rates as the packers have already cut kills the last several weeks to try to salvage their margins, which are deep in the red.
However, there have continued to be black swan and unconfirmed rumors circulating that have made the market nervous, including a major packing plant going dark.
He says open interest in the cattle futures dropped 18,000 contracts on Friday with a big portion tied to hedge lifting with June options expiring.
Where do the futures project to now that they are into all-time highs and there is no resistance on the charts?
Kooima says the June contract had a projected high of $227.50 based on a gap area projection and took that out Monday morning, so the upside is difficult to predict. Futures are still at a massive discount to cash which will continue to be supportive.
Lean hog futures are mixed early Monday but deferred contracts continue to make new contract highs. The hogs are seeing spillover from the rally in the cattle market but are trading their own fundamentals including the move up in the Lean Hog Index and cutouts, which are both at levels not seen since August of 2023.
Grain markets failed to extend last week’s gains with even the soybeans struggling to hold.
The higher week in Dec corn and wheat may have been short covering and some weather premium being added while soybeans traded optimism about the China U.S. talks taking place today.
However, the market still doesn’t have a big enough weather threat to keep the momentum going he says.
