Cattle futures and nearby hogs are higher early Friday with a softer tone to grain markets.
Cattle Futures Recovering on Higher Cash
After an ugly pullback in the cattle market futures are trying to recover for a third day on Friday according to Scott Varilek of Kooima Kooima Varilek.
He says live cattle has a $25 correction from the highs with feeder cattle a $55 correction from high to low and so the market is due for some recovery.
The first strong sign is cash feeder prices are back higher at the auction barns which Varilek says was where the initial strength in the market originated, so that is encouraging. Plus, fed cash trade has started to improve as the week has progressed with Southern live deals at $235 on Thursday and bids renewed at that level on Friday.
Technically Uptrends Still Intact
Chart damage has been done on the correction with some analysts pointing to a bearish pennant formation on the December live cattle and January feeder cattle. However, Varilek points out that the long term uptrend lines are still intact.
Mexican Border Remains Closed
Politically related news was part of the reason for the selloff in the cattle futures most notably the fear of the border opening to Mexican feeder cattle imports. However, Varilek says with the Mexican Ag Minister saying there has been no date set for opening the border, that has taken some fear out of the market.
Market Watching Brazil Tariffs
Yet, there is still lingering concern about the Trump administration removing the additional 50% import tariffs invoked in August which would allow more Brazilian beef, particularly trim, to flow back into the market. Varilek says that is a development traders are closely watching because while Argentina imports are a drop in the bucket Brazil is a top exporter.
Hogs Try to Bounce After Getting No “Love” From China Deal
Lean hog futures ended mostly lower on Thursday seeing no specific mention of pork in the China deal and with lower cash continuing to anchor the market. Varilek says nearby futures were trying to bounce Friday morning on end of the month short covering but a more sustained rally will be difficult until cash stops falling.
Corn Consolidates, Soybeans Pause Despite More China Purchases
Corn was lower early Friday on end of month profit taking and some farmer selling while soybeans traded two sided.
Soybeans were up sharply on Thursday making new highs for the move and 13 month highs in the January contract after China announced a deal that included 12 MMT of purchases for 2025 and 25 MMT for the three years following.
Friday morning there was talk of another four cargoes of soybeans being sold to China of the Pacific Northwest or 250,000 MT. However, it failed to rally soybeans as Varilek says the market has reached some technical objectives and likely hit some resistance. However, he thinks with the tailwind of the China deal soybeans can move higher. “You know what they say, soybeans don’t spend much time in the $11 range,” he adds.
