Livestock and grain futures were mostly higher early Monday with risk on buying across the complex.
Cattle Futures Bounce After Lower Weekly Closes
Cattle futures were higher early Monday after disappointing closes on Friday with lower weekly closes in both live and feeder cattle futures.
Brad Kooima with Kooima Kooima Varilek says the action was a red flag to him since it came after record fed cash trade.
“After 45 years what comes to my mind is when you whip the horse he had better run. Which is a way of saying when the news is good it should rally when the news is bad it should go down. If it doesn’t then you should evaluate just exactly what is the market trading,” he says.
Last Thursday the futures broke on fears of increased Brazilian beef imports and a change in the tariff and quota as President Trump was meeting with Brazilian President Lula.
However, when that didn’t materialize Kooima says the market should have recovered on Friday and it didn’t.
Futures vs. Record Cash
The other concern is that the futures failed to rally on record cash news of up to $260 in the North.
Kooima says, “Are you kidding me we got $260 and a lot of the $260 bought up in my region was for all the way into the first week of June from a couple of the major players.”
Basis Play
He chalks it up to a basis play on cash cattle where the cash is higher than the futures and this wide disparity between the two is mirroring the last bull market in cattle in 2014.
“One of the features to that was that we had an extreme basis. We had at times where futures were much below cash. I mean, like $8, $10, $14 for a while, $15. I wonder if that’s how, as we get to the end of this rally that most of it maybe won’t come in a basis adjustment. In other words, where cash goes much above futures,” he explains.
This happened in 2025 according to Kooima. “Now, last year at this time, hey, $8 or $10 or whatever, you know, with cash above futures. We traded like that a long time last year, okay? So, you know, part of me is going like, hey, you know, to have the June’s $10 under cash isn’t the first time. But I think, you know, you got to look at at least, I look at it a little more analytically.”
So, even though numbers are tight on cattle, the market may be indicating that demand isn’t going to stay very good.
Beef Demand Faltering?
Kooima says there is already evidence beef demand is faltering with Choice beef just over $388, in the face of slaughter cuts and a weekly slaughter of only 527,000 head.
He says that is a problem. “I’m becoming worried about it. Maybe two weeks ahead of Mother’s Day, usually that’s where we catch. That’s where the boxes start to rally. That’s where the middle meets, which is the steak cuts. You sell more strip steaks on Mother’s Day weekend than any other weekend of the year, followed by Memorial Day and Father’s Day.”
At the same time the market sees a movement of choice over select where there’s more demand for these these better quality cuts and that was only $3.38 on Friday which he says is not a good sign. It also means negative packer margins, which can’t be sustained and may result in another plant closure.
“Are we going to lose another packer or something like that or another shift or something. If you’re a packer and May is the month that you almost always make a lot of money and you are like halfway through and are losing like this, I’m sure that those Monday morning boardroom meetings got to be not much fun at all for them,” he adds.
High Gas Prices?
Is the slower demand a function of high gas prices finally taking their toll? Or it is just higher beef prices at the store?
Kooima thinks it is probably both at least in the case of higher priced cuts.
“Now, I should mention that, you know, when we talked about demand, demand for the grind is good for the hamburger,” he adds.
And if gas prices start to come down he thinks consumer demand will rebound quickly.
DOJ Probe Spooks the Funds
The other concerns is that the funds, who are long the cattle market, have likely seen the headlines about the DOJ investigation of the big four packers and got spooked.
“If you’ve got a fund manager, an algorithm that trades or reacts to headlines. What’s the long speculator going to do here? He’s going to go, well, geez, I got to trade crude oil. I got to trade Iran war and now this DOJ probe. If they think that there’s a chance that something really comes of that breaking up the big four it would be extremely bearish in the short term,” he adds.
Funds are currently long over 138,000 contracts and added nearly 6,500 contracts to their length last as of last Tuesday.
Feeder Cattle Futures Discount to Index
The feeder cattle futures are also at a big discount to the cash index index according to Kooima.
Feeder index today is going to be up around $375.86 is our guess. So we’re trading about $6 under or something like that. And as someone who’s actively in the cash feeder cattle market for these good 800 pound kind of cattle, if you can find them in the north, they’re not much cheaper, if any at all. So the demand for the cash feeder cattle continue to be very strong,” he says.
Hogs Bounce Off New Lows
Lean hogs futures were slightly higher Monday morning but bouncing off of new lows set on Friday. So can they hold?
Kooima says there are many fundamentals that should support the futures including the disease issues in the country and high priced feeder pigs.
However, it is being offset by the ample slaughter figures which is holding back the board.
Domestic demand has been steady but globally he says China is not buying much U.S. pork with their large hog supplies and there are concerns about Mexico.
Grains Higher Adding War, China Premium
Grains started higher on Monday adding premium back in as the war continues in Iran and heading into the China summit on May 14 and 15.
Kooima says the market is hoping for some additional China commitments but talk Friday puts their purchases of soybeans at another 12 to 13 MMT for this calendar year, which would be a disappointment.
The corn rally last week was capped as well on the July contract with a double top and the May WASDE will be a reminder of the large old crop corn ending stocks he says.
Still he is hopeful if the U.S. can secure some China corn purchases it could help corn and soybeans to continue to rally.
