Cattle opened higher but turned lower with the rest of the livestock and grain complex early Friday morning.
Cattle Correct but Project to $388 on Feeders, $264 on Fats
Cattle futures opened higher Friday and feeders made all time highs once again before seeing some profit taking.
Scott Varilek, Kooima Kooima Varilek says the feeder futures have put on $25 this week and were due for a correction but still project to $388 on the November contract, while live cattle could move to $264 on the December charts.
He says feeders have continued to be the leaders on the tight numbers and feedlots scrambling to buy inventory at any price.
The border being closed to Mexican feeder cattle has tightened supplies even further.
What Stops the Cattle Rally?
Varilek says the cattle market will continue to see this type of frothy action until the Mexican border is reopened and trade resumes, to which the timing is still unknown.
Brazilian beef imports have also seen an additional 50% tariff and that has also curtailed supply and so when that levy is lifted he says it could also have a chilling effect on the market.
Fed Cash Market Quiet
Meanwhile, the fed cash market has been very quiet as packers have been drawing inventory from cattle they had bought under delayed delivery arrangements a few weeks ago.
Varilek says there was some light business at $230 in the North early in the week and a few head were reported at $358 dressed on USDA’s mandatory report on Thursday, but otherwise it has been a thin market.
As a result, he says producers are holding cattle and feeding them to heavier weights.
Hogs See Further Fund Liquidation
Lean hog futures closed below major support on Thursday and are seeing some follow through selling on Friday.
Varilek says that market has seen a steep correction since the bullish news in the Hogs and Pigs Report and he predicts more downside pressure as fund continue to shed more of their record long position.
They are also hearing from customers that hog barns are full indicating disease problems have lessened and supplies are growing.
Grains Fall on Harvest Pressure, China Trade News
Grain futures are all lower on Friday as corn and soybeans see more harvest pressure ahead of a fairly open weekend for weather.
The other big news item is China overnight put levies on U.S. ships coming into their ports and has also reportedly purchased six cargoes of South American soybeans for Nov-Dec delivery. This follows China announcing they were putting additional restrictions on exports of rare earth minerals and sanctions on a U.S. chip maker.
This is weighing on especially the soybean market, despite President Trump reiterating on Thursday that he was going to talk to President Xi about purchasing U.S. soybeans.
Varilek says the market is starting to want some proof of that business before moving higher.
