Cattle were v2-sided to start but are trying to recover after a couple of lower sessions which saw profit taking. The stock market is rallying despite the CPI coming in a bit hotter than expected at 3.8% which may be helping to support the market.
So, was Friday’s reversal action an intermediate top in the market? Brad Kooima, Kooima Kooima Varilek, says it might be as sometimes a market tops when the news is the best.
Cattle futures hit new highs for the move last Friday. However, Kooima says the chart gap did not get filled on the April live cattle contract, even after being pushed by higher cash and boxed beef. The lower closes Friday and for the week were classic reversal action and may hold.
Kooima says the market may be trying to adjust the basis, “April live cattle are still at a premium to Southern cash trade at $185 last week. I would much rather have the futures at a discount to cash that is a much healthier place in the market.”
He says with the bullish supply situation the futures board is building a premium in the deferred contacts which he says makes sense. “We are slaughtering 5% less cattle than a year ago,” he says.
Hogs saw early pressure but quickly turned mixed despite Tyson Foods closing the Perry, Iowa plant. Kooima says the market handled that news well.
Grains recover after early pressure with some help from technical buying and short covering. Conab also lowered Brazil’s corn crop nearly 1 mmt and the soybean crop by 2.4 mmt. So, are funds going to cover their massive short position and can the rally continue?
Kooima says he is optimistic about corn continuing to rally as it is now above not just the 20-day moving average, but the 40-day moving average.
He thinks $12 will be difficult for the soybeans to take out right now but it could happen in April.
