Cattle and hog futures opened firm Friday then turned mixed, grains are mixed to lower.
Cattle Futures Try to Recover
Scott Varilek with Kooima Kooima Varilek says live and feeder cattle futures are trying to recover after an ugly day Thursday that ended with bearish reversals, in fact key reversals in feeder cattle.
He chalks it to end of the month profit taking and the fact the market was overdue for a correction after a string of days where futures continued to make new contract and record highs.
However, the push lower was on light volume and the cattle futures have negated several key reversals in their overall historical bull run, so there’s no indication this is the top he says.
Cash Cattle Trade Higher
Even with the plunge in futures Varilek says the packers came out looking for cattle and pushed cash trade higher on Thursday with sales from $242 to $245 in the North and $235 in the South.
He says some of the cattle will be picked up as early as Monday, a good indication of strong demand.
Feedlots and farmer feeders have been willing sellers as they have close outs in the $1000 per head range.
With the discount the futures are holding to the cash Varilek is hopeful that will help negate the futures crash on Thursday.
Outside Markets and Tariff News a Headwind for Cattle and All Ag Markets
Cattle might have had an easier time recovering on Friday morning without all of the negative tariffs news and the risk off selling that is creating in the stock market.
However, the tariff rate on Brazilian beef imports will reach nearly 76% if the additional 50% increase goes into effect in less than a week.
Varilek says Brazil is the top importer of beef into the U.S. so that could further tighten supplies and support the market.
Lean Hogs Reverse Higher Opening
Lean hog futures were higher on the opening with cattle and then sold off with the outside market weakness.
The market also hit resistance on the charts that has held back futures, despite tight numbers and disease problems.
Varilek says, “Demand is holding the market back because even though it is a cheaper protein that beef consumers aren’t trading down to that protein. Plus, its not being featured by the fast food or restaurant sectors.”
Corn and Soybeans Lower in July
Corn and soybeans posted an ugly lower month in July with December corn down nearly 12 cents and November soybeans down 38 cents.
Varilek says that trend may continue in August with favorable weather, big crops and continued tariff uncertainty.
Export demand has failed to rally the corn market with additional flash sales of new crop corn on Friday totaling 13.8 million bushels to unknown destinations.
Tariff Fears Hurt Grains
President Trump announced new base tariffs of 10% to 41% on countries that had not negotiated trade frameworks by the Aug. 1 tariff deadline.
Mexico negotiated a 90-day extension, but Canadian tariffs were raised to 35%. However, ag exports to both countries are exempted under USMCA.
China’s tariff deadline is Aug. 12 and President Trump has not decided if he will extend the tariff delay for another 90-days as agree upon by trade negotiators earlier this week in Stockholm.
