Grain and livestock futures closed mixed on Monday.
Brad Kooima, Kooima Kooima Varilek, says nearby live cattle were under pressure despite steady to higher cash trade.
Why the divergence?
“We’'re getting used to this discount structure in the market. We’ve talked about this where the long speculator seems to not dare to step in front of it here. There have been a lot of years where the cattle futures would be trading premium especially where we had a little weather which we haven’t had yet of course. So, that’s been a frustration for a while,” he explains.
Kooima says there are some bearish market participants that believe that cattle numbers will be higher in the first quarter of 2025, especially in the South.
It is not unusual, according to Kooima, for the North to have tighter numbers in the third and fourth quarters and as we get into the new year there’s less yearlings placed.
He says there is also some hedge pressure as the board is providing some opportunities for Northern feeders to lock in some profit, but also pull cattle forward.
That showed up in the USDA Cattle on Feed Report.
“The on feed numbers in Nebraska were 101%, in Iowa at 103% compared to the two big states, Texas at 99% and Kansas at 97%. To follow that up, the placements number in Nebraska was at 104%, Iowa at 103%, Kansas was on par with 104% but Texas was at only 88%" he adds.
The Texas placements were down due to the border being shut to Mexican feeder cattle on November 22 with the case of New World Screwworm.
However, Kooima points out that with an on feed number of 99.7% and placements at 96%, there was no evidence in the report to back up fears of the higher numbers.
Lean hog futures ended lower Monday seeing fund liquidation and profit taking and Kooima thinks there is a larger correction brewing.
Corn ended higher with the help of wheat, export business and fund buying or technical momentum from the six month higher weekly close on Friday.
Soybeans were lower having already digested the China export news last week with talk of them buying 1.2 MMT of U.S. soybeans.
Without confirmation though the market saw some profit taking after running into chart resistance.
