Cattle and hogs are mostly higher early Friday, with grain markets mixed.
Scott Varilek, Kooima Kooima Varilek, says after two ugly down days in cattle futures the markets are trying to recover.
This comes despite higher cash Thursday in the North with the volume live at $229, up $1 from last week, but even a few at $230. Dressed prices were mostly $358 to $360, up $2 from last week’s weighted averages. In the South cash was $218 to $220, so up $1 to down $1 compared to last week.
Both live and feeder cattle futures put in bearish key reversals on Wednesday and saw follow through selling on Thursday.
Some of it was profit taking by speculative traders but there was also hedge selling from producers which added pressure.
“Everyone is nervous at these high price levels,” he explains.
Even with a higher day on Friday, Varilek says the futures are working on key weekly reversals lower.
“We have had several of these reversals and always came back with the help of the cash market, so we’ll see if we can do that again because the fundamentals are still bullish,” he says.
Lean hogs ended higher for a second day despite the June contract holding a $10 premium to the cash index.
What is supporting the rally?
Varilek says cattle/hog spreads were unwound on Thursday helping support the hog futures and the feeder pig market is tight due to persistent disease issues.
June closed above the $100 mark Thursday and is seeing follow through buying Friday also with the help of a little strength in the cash index and cutouts were up $2.58 yesterday.
Soybeans are trying to recover after 26-cent losses Thursday on spillover from bean oil which was locked limit down on a rumor of lower RVO levels for biomass based diesel in the proposed rule from EPA.
Varilek isn’t sure the early strength will hold as soybean oil is still seeing pressure plus there are other factors serving as headwinds for the market.
Corn is back lower on Friday with the bearish influence of the wheat market, but has rallied off the new lows hit earlier this week and could post a higher weekly close.
So, is the corn market done going down?
Varilek says old crop corn is finding good value buying with the cheaper prices, but with favorable weather and rains in the Western Corn Belt he thinks that will anchor new crop corn and keep a lid on old crop as well.
