Live cattle see a second down day on profit taking after new highs for the move on Monday and with the stock market sharply lower on hotter than expected CPI data which came in at 3.1%. Feeder cattle also made new highs Monday and closed stronger but are also seeing Turnaround Tuesday consolidation.
Brad Kooima, Kooima Kooima Varilek, says the set back is a healthy correction in a bigger bull market. He says there are so many positive fundamentals supporting the market including last week’s higher cash trade, as the 5 Area weighted average steer price came in at $181.15, which was up $3.35 and marked the fourth week of higher cash cattle trade. Boxed beef cutout values were also higher on Monday, weights have continued to fall under year ago levels with the recent winter weather stressing cattle and year to date slaughter is nearly 6% below last year.
Hogs continue to see pressure taking premium out of the back months according Kooima. He says the prices in the deferred futures were just too optimistic for the fundamentals and so a correction was in order. Plus, he says up front slaughter numbers are still large. The funds had pushed over 30,000 contracts long again in that market and have also been taking profits.
Corn is trying to extend gains on fund short covering with the funds near record short in that market and correcting the oversold status of the futures. However, lower wheat futures and bearish outside marketing, including a higher dollar, have already pulled corn off its highs, plus corn is running into chart resistance.
However, Kooima says the one positive is corn basis levels are starting to firm up in many areas, especially around ethanol plants. “That could help produce a rally as farmers have been tight holders of corn.”
Soybeans started with strength trying to extend Monday’s gains as funds covered some of their short position. However, Tuesday soybeans have traded sided with a lack of bullish news and improved weather in Argentina.
