Early Monday cattle were higher, hogs mixed and grains mostly lower.
Cattle Extend Gains, Lows In?
Cattle were higher again on Monday extending gains after higher weekly closes last week and clearly putting the border reopening in the rear view mirror.
Brad Kooima of Koomia Varilek says the lows look like they are in.
“They overdid the reaction, I think, to the border reopening. I mean, it’s going to be a gradual reopening in the middle of August. I think that there’s some input from positive comments coming out of the Fort Morgan deal.”
He says plant workers look like they’ve reached a settlement with Cargill and will vote on Aug. 4 and he’s hopeful that will go as planned.
“And then they, you know, do a bit of a slow reopening, which I don’t get that either. You’re going to go back to work or you’re not. But that seems to be the talk of starting back with one shift maybe sometime later on this month. But we’ll see. But I mean, you know, that that’s a positive story, too.”
Cattle Recovery Continues?
He says it looks like both cash and futures have caught and the board action was positive to start the week with futures taking out last week’s highs.
“Friday, we rallied to about the 38% retracement, which is always that first line I draw. And now the next one is halfway back, but there’s a couple of moving averages. If you’re wondering what that is, October, we’re talking about someplace like in that $231.50 give or take. So maybe we can get that far.”
However, he is cautious regarding further recovery because with the lighter slaughter due to the heat the boxed beef prices have not responded.
“Look at the slaughter levels. They’re terrible. I know it was 150 degrees and some of that’s due to the heat and the death loss is horrible. But that does give you a holding action when we’ve already been in a holding type mindset anyway for a while because we’ve got high break-evens and we’ve all decided to make the cattle bigger, right, to try to cheapen up our break-evens,” he says.
He is hopeful that farther into August the boxed beef values will catch due to Labor Day buying.
“So I think maybe you got a chance here to bounce here during the month of August, but I’d be a little bit worried about what might happen after that,” he says.
Kooima points out the 50% retracement is just $2 away and he doesn’t think the market can get beyond that.
Cash Market Bounces?
He says the one thing that could pull the market above the retracement levels is higher cash.
Cash did improve as the week progressed with some $233 and $235 sales at the end of the week.
“But you got to packer without the margins getting any better with beef being so sluggish. He’s going to continue to drag his feet and drag his feet,” he says.
Still he thinks the odds are 60% to 70% in the favor of producers getting $235 this week or a bit higher.
“If you’ve got a bunch of big fat steers that lost 100 pounds during this hot weather, you’re probably a little reluctant. You’d like to get some of that compensatory gain and get these cattle back to where they ought to be. But I would guess we’re going to be a little bit better in the cash. At least that’s what I feel like on a Monday morning,” he adds.
Death Loss
The heat has caused some death loss across cattle country
Kooima says the industry is whispering totals of around 30,000 head. “And that probably includes a variety of kind of cattle. I know cattle
that all the way from 800 pounds to 1,600 pounds. Some of these cattle are maybe, feeding cows, heiferets, different things like that, that maybe don’t exactly fall into the normal category of fed cattle like they sometimes would.”
But he says it’s a guess as many customers don’t want to talk about their losses regardless of totals.
“While it’s really significant to the individuals that are involved, at this point, probably not enough to square up or change. It’s not game-changing numbers when you look at it in a big-picture sense, in my opinion. Yeah, although it may not be over. I know we’re supposed to
Feeder Cattle Cash Recovery
The feeder cattle market did see a major improvement in sale barns last week but the index is now below the futures.
“And some of that is because this index has imploded and a lot of that’s because there haven’t been many northern cattle sales. Now, Ft. Pierre had a pretty good sale, I understand, on Friday. And that’s going to influence the index to be a little bit higher, I think, today when it
gets printed.”
However, he says there has not been a lot of northern sales as producers reluctance to sell cattle when it’s this hot and when the market is down.
“They don’t want to take these lower prices if that’s what it’s going to be at an auction is what they’re fearing. Even Oklahoma City which is kind of the moniker on Mondays usually for these things hardly has a sale today. So we’ll see once,” he says.
Kooima thinks there’s also a little bit of a holding action situation going on in the feeder market.
“If, you owned a 800 pound steer and didn’t have any urgency you might wait to see if the market does settle down here a little bit particularly after the border opening news and things like that so i would guess that it’s still going to be difficult to really break that feeder cattle market very far they seem to have a willingness both on the part of the corporates the individual feeders and certainly about uh some of our neighbors to the north, I’m talking about Canada seem to be real real engaged in the feeder cattle market. So for us to really think a big sell-off in the feeder cattle is going to come I would doubt it,” he concludes.
Hogs Mixed But Forging Seasonal Top
The lean hog futures were mixed early but look like a seasonal top has been forged with nearbys scoring lower weekly closes.
He says, ‘“Seasonally almost on time chart wise. We came back to halfway back and the 100-day moving average last week, that $103 area, and then just failed. There might have been some extra news going on but I think largely this break is mostly technical in nature. opefully, we don’t have to go all the way back to the lows, but we’re flirting with halfway back here already. It only took us two days to lose what it took us, almost six weeks to gain. So unfortunate trade.”
He says there was a gap left last week that the market may go back and get but he’d be looking at that as a selling opportunity.
Grains Fall With Rains
Grains all posted lower weekly closes last week removing weather premium and extended losses early Monday.
He hopes the market can find some support soon. “We are too oversold to sell it here. The November beans are low today as the
40-day moving average. There’s some stuff here that hopefully from a technical standpoint would give us a reason to not sell it. No, we need some reason to get it to rally now.”
While not everyone got the rain needed the market is trading rain makes grain.
This is despite China flash sales of nearly 18 mb of soybeans and another 5.0 million bu. to unknown destinations.
“Now that we’re way off the highs that the crops in better shape than what they were worried about a week and a half ago. So I think we can catch here, but I believe you got an attitude here where maybe you got to sell rallies yet. And then when we get closer to harvest and
maybe we can find out that actually the corn acres, first of all, probably aren’t as big, in my opinion, as what they’ve been stating. And that maybe we have trimmed some of this yield back with what, you know, on the Eastern corn belt’s been too wet, Western corn belt being affected by this extreme heat and lack of rain. But for now, I think rather than arguing with the market,” he adds.
