Cattle opened lower Monday morning, with hogs starting lower then turning mixed. Grains opened sharply higher.
The cattle futures saw follow through selling pressure on Monday after huge reversals on Friday and limit down closes in feeder cattle futures.
Both live and feeder cattle futures are under expanded limits on Monday but fortunately the market have not seen massive panic or follow through selling.
Is the Cattle Market Top In?
Brad Kooima of Kooima Kooima Varilek says the cattle futures have negated more than a handful of technical reversals after making new highs.
However, he says it is very possible the cattle market top may finally be in.
The sell off was triggered by an unconfirmed rumor that New World screwworm was detected in the U.S. and the headline was picked up by algorithm traders.
“There was another screw story, this time it was supposed to be in Oklahoma. The whole story seemed contrived from the get go. Even I understand some of the video about the behind the story was the exactly the same video that they used a couple of months ago in the story in Missouri.”
Still, Kooima thinks the market looked toppy prior to that.
Beef Packer Kill Cuts
He says one signal has been the slow down in beef processing by packers whose profit margins have been in the red. Another major packer announced on Monday they would only be slaughtered 32 hours this week.
The weekly cattle slaughter total was only 536,000 head, which is down 52,000 from last year.
Packers have been trying to prop up boxed beef values and were successful at driving Choice values up $15.62 for the week.
Cash Cattle Trade Lower
The cash market was also lower on Friday in the North, which may have contributed to the negative psychology of the futures.
Northern cash developed at mostly $380 dressed, down $4 from the prior week’s weighted averages, with live sale prices ranging from $240 to $245. Southern deals were mostly $235, steady to $.50 lower, but there were a few up to $237.
What Technically Could Trigger Fund Liquidation?
Kooima says to see additional fund liquidation in the cattle futures he is watching the 20-day moving average in the October live cattle at around $222 as a line in the sand for funds that if breached could cause further liquidation.
For September feeder cattle futures he is watching that same moving average which coincides with $333.70 on the charts as a support area that needs to hold.
Lean Hogs Turn Mixed
Lean hog futures opened lower with cattle and then turned mixed.
While the fundamentals are still fairly strong with tight supplies, stronger cutouts values and a slightly higher lean hog index, the futures have been unable to get through chart resistance areas.
Kooima says with the big discount the deferred futures are holding to the cash index and the front end of the board he can’t be overly bearish lean hog futures.
However, more clarity on trade, especially regarding China, would help.
Grains Higher on China Hopes
Grains were higher early Monday, led by soybeans on hopes for China business or even a trade deal.
President Trump put out on social media overnight that China was concerned about a shortage of soybeans and he encouraged them to quadruple their purchases ahead of the Aug.12 tariff delay deadline.
However, there is no indication that there is any China soybean purchases and so Kooima is doubtful the market can hold the gains or see much additional buying, especially with the WASDE report likely to confirm larger yields.
