Cattle start lower then quickly rebound, with hogs, corn and soybeans under pressure.
Cattle Try to Recover After Reversals Friday
Brad Kooima with Kooima Kooima Varilek says the cattle futures opened lower on Monday on follow through selling after the bearish reversals scored on Friday.
However, the futures quickly recovered as the market has seen resilience with the steep discount the futures are holding to the cash and funds continuing to buy on the breaks.
Cash trade last week was steady to still a little firmer with the South at mostly $230, steady to $1 higher. The North live was at $240 to $242 live and dressed mostly $380, steady to $1 higher.
Yet Kooima says the market felt heavy and he thinks cash will be steady at best this week.
He points to some bearish seasonal fundamentals churning in the market and packers cutting kills due to poor margins and boxed beef has corrected well of the highs.
Kooima says we are in the dog days of summer when beef demand starts to turn towards hamburgers and hot dogs versus steaks.
Funds extended their long positon in live cattle as of last week’s CFTC Commitment of Traders Report to over 132,000 long and in the feeder cattle funds are record long at nearly 38,000 contracts.
So Kooima says so far the funds have defended their long position but the market will need to avoid a black swan event that could spook the funds and trigger liquidation.
Lean Hogs See Profit Taking
After three higher closes and a higher week the lean hog futures have run into chart resistance and are seeing some profit taking to start the week.
Funds are still long nearly 115,000 contracts but sold around 17,000 contracts as of last Tuesday.
However, the Lean Hog Index was up another $.43 coming into the session and cutout values were up $1.47, which will help stem the selling.
Corn and Soybeans Fall
Corn and soybeans are seeing pressure early Monday on profit taking as new crop corn and soybeans both came within cents of gap areas on the charts and could not close above those levels.
The bigger drag on the market according to Kooima is the rains that fell in the Corn Belt over the weekend.
While there is heat in the forecast this week with a ridge of high pressure building in the rain will offset some of the negative effect.
Kooima expects high crop ratings to continue in this afternoons crop progress report from USDA and he thinks the corn looks in Iowa looks like the best crop in his career, so he doesn’t think an early harvest low was scored last week.
