Live and feeder cattle futures see some early consolidation and profit taking early after new highs for the move on Friday. The market ran up into some chart resistance says Brad Kooima, Kooima Kooima Varilek. However, during mid morning prices are back making new near term highs.
Cash cattle trade was lower last week and is likely to be steady at best this week he says. There were also 26 deliveries against the February contract in the South and packers are cutting kills which is throwing some negative psychology at the market.
Boxed beef cutouts are hovering just below $300 on the choice category but Kooima says after the Super Bowl there is a seasonal slowdown in beef demand.
The one positive is the Cattle on Feed Report will be out on Friday and placements are expected to be much lower with average trade guesses around 85%, mostly due to weather and high replacement costs.
Hog futures are strong on China economic news and higher cutouts which were up over $3 on Monday. Plus, there is some unwinding and profit taking on hog cattle spreads which is supporting the hog futures.
Grains are also strong with a gap higher open in soybeans overnight. China is lowering its mortgage/interest rates and there is talk of them buying Brazil soybeans which may be supportive. That seems to be pulling corn and wheat higher in addition to a lower U.S. dollar and an oversold market condition.
The question is can any rally in the grains be sustained and Kooima says right now he is doubtful as the funds added to their short positions in all the grains in last week’s Commitment of Traders Report.
