Cattle are trying to recover this morning after triple digit losses with futures hitting chart resistance yesterday and failing. What will it take to get the market above these chart areas and can cash move higher to help?
Brad Kooima of Kooima Kooima Varilek says the futures market is rangebound right now and may have to wait for the cash to catch up. “The market is saying show me indeed that the cash is going to take out these levels and then maybe the futures will follow along,” he says. Cash trade was slightly higher last week with the 5-area weighted average at $183.30 up 40-cents and Kooima expects firmer cash trade again this week.
The other headwind for the continued rally is packers have been slowing chain speed. Last week’s cattle slaughter was under 600,000 head and Monday was only at 100,000 with three plants dark for cooler cleanout.
He says the other factor holding back cattle is the weights have been creeping up, which is not the normal seasonal. It is a result of warmer weather the last few weeks.
Boxed beef prices have been strong with Choice cutouts above $306 but beef may be getting a bit too high for the consumer and with lower pork prices it may be difficult to move the cutouts much higher.
Hogs are seeing consolidation, after a strong run with futures getting too premium to the cash index. Plus, there has been some rolling in nearby contracts ahead of the Goldman Roll. The summer months cleared $100 and Kooima says they have been suggesting producers hedge at these levels.
Corn and soybeans are seeing profit taking after hitting the 20-day moving average yesterday on both May corn and soybeans according to Kooima. He says there isn’t much bullish news to push the row crop markets much higher unless USDA confirms smaller crops in Brazil. And even then, every rally has been seeing a pickup in farmer selling which may make price appreciation difficult.
