Live cattle were higher feeders two sided with hogs sharply higher early Monday. Corn and soybeans were trying to hold gains as wheat fell.
Live Cattle Hit Contract Highs
Live cattle were higher early Monday with deferred contracts making new contract highs.
Brad Kooima with Kooima Kooima Varilek says the futures are chasing sharply higher cash trade from last week.
Cash Skyrockets
Cash trade was higher on Thursday at $245 to $246 in the South, up $8 to $9 and the North traded $245 live and mostly $385 dressed, up $13.
“Absolutely this cash market even with the Greeley plant being closed and even with all the uncertainty going on with the geopolitics and all the other stuff cash was basically $245 in fact there was some $246 bid around here on Saturday, the day before Easter. So that’s pretty impressive.”
He says show lists are very tight in the North, weights are falling and the backlog of big cattle has been worked through.
“Now all of a sudden you’re in between crops of cattle mostly the yearlings are gone and the calves aren’t fat yet even though the weather has been ideal.”
Cash Higher Again This Week?
So will cash trade be higher again this week with feedlots regaining leverage?
Kooima says, “I think yes. I think most everybody’s kind of got $250 in mind this week, and I think we’ll get it. And it’ll probably be led by the North. So it’s kind of weird to me how the packer really lost his leverage last week.”
He adds that the market has already exceeded his expectations and could shoot all the way up to $260 before it runs out of gas.
Greeley Plant Strike Over?
Over the weekend the strike at the JBS plant in Greeley, Colorado ended and so the plant will be killing cattle on Tuesday according to Kooima.
“I think they might get 3,500 cattle dead tomorrow as the union has agreed to go back to work and while they continue to negotiate. So not unexpected. We kind of heard this was coming last week. But of course, that’s going to force that outfit to have to buy a few cattle, we think anyway. And then that should help press the thing toward $250.”
The union went back to work despite their demands being met but Kooima is fairly sure the strike is over for good.
“The back story of this had been that, well, this is a deal, an agreement that all their other plants had already signed on to. And so, you know, a lot of us on the sidelines were thinking like, well, what do you expect JBS to do to make a different deal for Greeley? You know, maybe there’s some small concessions with some benefits or something, but to say that they were going to reopen that whole thing. And then of course, you know, the union leader has of this particular union has a reputation of, enjoying strikes. And so, you know, you wondered about it. I would say that you can’t completely say, okay, no worries at all. But for me, I’d be, I’d be 80% sure that they’re probably back to work to stay,” he explains.
How Long For Greeley to Return to Normal?
So how long will it take to get Greeley back to full capacity?
Kooima says, “I’m guessing, but the boots on the ground there, they think maybe, you know, capacity is 5,400. But I don’t know if there’s a plant
in the universe that’s killing it capacity with this tight supply. The talk was that they maybe could get back to where they were, which is around 4,800 to 5,000, maybe as soon as two weeks. So we’ll see. Probably depends on the margins and the profitability, too. That’ll probably incentivize them, give them a lack of incentive to get real aggressive if the packers kind of lost his margin here on this last last last move here.”
Feeder Cattle Sloppy Fearing Border Reopening
The feeder cattle market has not made new highs like the live cattle and it fact Kooima says was trading two sided and sloppy on Monday.
It is likely the fear of the border reopening to Mexican cattle and USDA Secretary Rollins has changed her stance when that event will take place and retreated on how much of threat New World Screwworm (NWS) is to the U.S. cattle herd.
So, Kooima says its more likely within the next few weeks.
“Personally I am really tired of this deal. I think they’ve made so much out of it. This is something that’s treatable. This isn’t mad cow disease. This is a worm. Ever heard of IVAMEC? So her narrative changed in that they think maybe now it’s time to do a gradual reopening. They’d
start way on that west one there, Sonora, the one in New Mexico. They’re 800 miles literally from the nearest incident of screwworm fly.”
However, he says the Mexican cattle industry has built feed yards and packing capacity and is making money so the number of cattle coming across the border may be less than expected.
“They’ve tripled their kill capacity because they’re killing cattle 24-7 instead of eight hours a day for five days. So we may never go back to where
we were. In fact, I doubt very much that we ever will, you know, back to that 1.3 million head a year. But for my money, I don’t know. I think I’d just soon know where they are instead of having to absorb all their meat into our consumption and wondering exactly what it is. But that’s just me,” he says.
Plus he says the market has rallied $23 in three weeks and filled the chart gaps, so it is overbought.
Hogs Rally on FMD in China
Lean hog futures were also higher on Monday with news that China has cases of Foot and Mouth Disease in two provinces.
Kooima says, “Those kind of headlines really will spark it. Obviously, China has been noticeably absent from our export business here because it feels like they’ve got their whole industry back, you know, through their disease cycle and after low productivity, high productivity. Now, I don’t know if FMD is necessarily quite the like PRRS risk or, you know, all this other stuff. But yeah. For now, it’s given us a pretty good headline bounce.”
He adds that disease problems in the U.S. herd are also causing the feeder pig market to rally.
“Everybody’s talking about the disease problems here in the United States as well. PRRS, some new strain. It seems like it never fails. You can only go a year or two before something else happens. So I know these guys that are buying feeder pigs are really chasing the market.”
Corn, Soybeans Struggle to Hold
Corn and soybean futures are struggling to hold slight gains with the wheat market lower and uncertainty tied to war headlines and the energy market looking for direction.
“If you’re bullish you better hang your hat right on that post because that’s I don’t see a lot of other stuff to hold the market except what the weather is going to be this summer and nobody knows what will happen with that,” he states.
Seasonals are a little stronger during the planting season but he says the cash basis levels on corn in the North are weak even around ethanol plants.
“Basis is really weak 40 to 50 under tells me there’s all kinds of old crop corn left. So, let’s give it a chance here the next two weeks let’s hope we bounce a little bit,” he adds.
