Cattle futures were sharply lower Monday, hogs highs and grains mixed after a higher start.
First Human Case of NWS in U.S.
Brad Kooima of Kooima Kooima Varilek says live and feeder cattle futures gapped lower on the opening after a human case of New World screwworm (NWS) was announced over the weekend.
It was found in a resident of Maryland, who had traveled from El Salvador and that person has received treatment for the infection.
USDA has rolled out a five-part strategy to eradicate screwworms, including building a sterile fly production facility and releasing lab-bred male flies that can’t reproduce into outbreak zones. It’s the first human case in decades on U. S. soil.
Kooima says the market actually handled the news better than he thought it would and he was expecting a lower opening in cattle anyway with the bearish placements figure in the Cattle on Feed Report.
USDA Cattle on Feed Report Bearish
USDA’s August Cattle on Feed Report was slightly bearish as placements came in at 94% of a year ago but the average trade guess was 91%.
He says this is an indication that cattle producers are backing up cattle.
The state-by-state breakouts showed Texas at only 75%, while Iowa was at 118% which also shows the continued influence of the Southern border being closed to Mexican cattle imports.
However, the on feed numbers were at 98% of a year ago, which was as expected and confirms the continued trend of tight supplies.
Cash Convergence
Kooima says cash trade was sloppy in the North last week but higher in the South at mostly $240 live, which was up $5 from the previous week.
He says the cash is starting to converge with futures and the South is starting to converge with the North.
Is the High In the Cattle Market?
The bearish technical action off new contract and record highs on Friday may be signaling a top according to Kooima.
He admits there have been several key reversals the cattle market has negated but he thinks this one might stick.
The reason is because the market is overbought, but also the seasonals are usually weaker for the cattle market in September as the market moves past the Labor Day beef demand peak.
Hog Futures Try to Narrow Discount
Lean hog futures were higher early Monday on spread unwinding with cattle but also extending gains after higher weekly closes.
The October contract is holding a sizable discount to the cash and that may be somewhat attractive to fund traders.
However, Kooima says the cash trade is weakening and it is more likely the futures will fall towards the futures to make up that gap.
Corn Extends Gains
Corn futures were high on Monday extending gains after a higher weekly close and with the tailwind of Pro Farmer cutting yield estimates by 6 bu. below USDA at 182.7 bu. per acre.
Kooima says that confirmation is enough to keep the market in recovery mode, especially with strong exports.
Soybeans See Profit Taking
Soybeans were higher on the opening but ran into chart resistance and saw some profit taking.
The market has rallied nearly 75 cents off the lows and needs additional bullish news to get through these chart areas.
Kooima says exports have been decent despite China being absent from the market, but it might take China purchases to keep the rally going.
