Cattle futures see some pressure early Friday with hogs and grains mixed.
Cattle See Profit Taking Early Friday
Scott Varilek with Kooima Kooima Varilek says live and feeder cattle futures saw end of month profit taking on Thursday and some follow through selling early on Friday.
He thinks its just routine and healthy in a bull market but selling in the August live cattle was also triggered on Thursday by some deliveries and the basis flipped.
Varilek says those deliveries were reclaimed and so the futures quickly stablized with the strong cash market.
Cash Test Light
Cash news has been light but looks steady to stronger with some $245 paid in the North on Thursday, even a few $246 sales to a regional. Southern business has been mostly $242.
Combination of Factors Support the Bull Run in Cattle
Corrections have been fairly shallow and short lived in the cattle market because of the rare combination of factors that are fundamentally driving the futures and the cash market.
Varilek says everyone knows about the historically tight cattle herd but add on top of that strong consumer demand.
Plus, the continued closure of the Southern border to Mexican cattle has tightened supplies even further and resulted in historically low placements in feedyards in the South.
The 50% tariff on Brazilian beef imports had just added fuel to the fire as they provide a majority of the lean trim used for ground beef.
Cash Feeders on Fire
Another major bullish factors has been the record high prices being paid for cash feeders in the country.
Varilek says the market is red hot and so feeders are the leaders which is also indicative of a bull market.
With strong profit margins for feedlots and the tight numbers they have been willing to pay any price they have to to place in feed yards.
Lean Hogs See Chart Breakout
Lean hog futures have seen a chart breakout this week and deferred contracts have made new highs for the move.
Varilek thinks most of the buying has been technical in nature, not fundamentally driven, so the rally may be a hedge opportunity for producers.
Corn and Soybeans Trying to Bottom?
Corn futures have held key support this week and after testing the 20-day moving average on Thursday managed to close higher.
Varilek says the market is trying to confirm a low as the largest yield estimates are already priced in and the crop is likely getting smaller due to disease.
Soybeans are also trying to determine the size of the crop especially with the dry conditions in parts of the Eastern Corn Belt to finish the season.
