Grains started lower Tuesday with cattle higher, hogs mixed.
Grains Slide Early Tuesday
Jeff Hoogendoorn with Professional Ag Marketing says the grain markets were lower on disappointment about the tariff truce with China being delayed another 90-days as there was optimism for a deal.
Soybeans retraced about a half of Monday’s gains, corn and wheat were lower.
The markets are also gearing up for the August WASDE with expectations of higher corn and soybean yields.
However, Hoogendoorn thinks the biggest yield numbers are already programmed into the market and he points out that this report does not include field surveys.
Tours such as those done by Professional Ag Marketing are in the fields taking samples and finding lower yields than last year in states in the Eastern Corn Belt due to pollination and disease issues.
Cattle Futures Continue to Recover
Cattle futures continue to recover after the bearish reversals on Friday.
Hoogendoorn says he is encouraged the market has not seen additional selling and today’s close will be important for negating the technical damage done to the futures.
“The October live cattle held support at the 20-day moving average, which has held in the past,” he says.
He is referring to the more than a half dozen bearish key reversals the cattle futures have staged that have been negated as the futures made new highs.
The strong fundamentals have not changed in the cattle market including the tight supplies, although Hoogendoorn says cash has been king and the weaker Northern cash may have also pressured the market.
“So far, it’s shaping up to look very similar to the last time that we tried to do this. You know, the only thing that’s a little
different, I do think that cash market maybe was a little bit weaker, particularly in the North last Friday.”
Lean Hogs Holding on Tight Supplies
Lean hog futures have been holding together with the help of the higher cattle market but Hoogendoorn says the real strength has come from tight supplies with weekly kills running around 2.4 million head.
“The hog slaughter is running about 2% lower for the year due to disease. That’s based off probably five to eight weeks of data, something like that, right? So there’s been enough water under the bridge, I think, to make that observation. The challenge is what happens going forward. Right now, you’ve got a pork packing industry that’s, I think, slow playing the normal seasonal increase that you would see take place. We’re gonna be a good 4 % less than last year for this week, for an example.
Will The Tight Supplies Support Prices in 4Q?
The 4Q hog market normally sees some weakness because of the increase in supplies but will there be less hogs in that time frame this year to support prices?
Hoogendoorn says, “We get down the road here a few weeks to a month to six weeks and say, man, there sure feels like a lot of pigs around. I think that will write itself as you get further into October here again. We just saw a significant change in health status as we went into the first of May, maybe the end of April.”
And so that could mean a little pressure on prices in the 4Q before the market recovers.
The deferred contracts are trading at a discount to the cash and nearby futures.
