Cattle saw early strength with mostly lower hogs. Grain markets opened lower then turned mixed.
Cattle Higher With Outside Markets
Cattle futures were mostly higher early Monday.
Brad Kooima says cattle were catching some spillover selling from the news the Iran peace deal had been signed which was rallying the equity markets and sending crude oil sharply lower.
“It feels to me like the news is pretty decent. Outside market influences, as you outlined, with the stock market, et cetera, and with the apparent Iran peace deal,” he says.
Cash Market Improved Friday
He says adding to that buying interest is the firming cash market on Friday afternoon.
Trade improved in the South to mostly $255 to $256 but the North was at $256 to $257 and late in the day Western Nebraska saw some $258 trade. Dressed prices were mostly $404 to $405.
As a result he thinks cash will be higher this week, especially as packers have not been buying for delayed delivery and have chewed through that inventory.
Market Fades Plant Closure
The futures were also fading the announcement that the JSB beef plant at Sauderton, Pennsylvania was closing in mid-August.
How big of an impact does this have on slaughter capacity?
Kooima says the plant was killing between 2,000 and 2,400 cattle a day. “Back in the day, they used to be largely a cow kill plant. They weren’t anymore. They were killing mostly fed cattle. They killed a fair number of Canadian cattle.
But they also killed a fair number of cattle. Northwest Iowa, Eastern Iowa and Illinois. There ain’t a lot of cattle there, but the cattle that are there don’t have a lot of places to go. Joslin is a Tyson plant.”
He says any time you lose packer capacity it is disturbing but right now it doesn’t make a big difference when numbers are this low.
“What I worry about is the unintended consequence of the way the policies have been here the last while. We already had the smallest cowherd since 1951. Now throw that another, let’s call it a white swan, the closing of the border
and then leaving it closed this long, making it sound like it’s the biggest crisis in ag history, which it isn’t. Now you’re starting to, you’re seeing this decay of our infrastructure in the United States and at the same time a big ramping up of the infrastructure in Mexico. To me this is short-sighted and nobody’s gonna care until we have one too many steers,” he explains.
NWS Market Impact
Market headlines continue to circulate about New World Screwworm (NWS) with 12 cases to date reported by USDA.
However, he thinks the market has moved past that headline and it won’t have an impact on supply.
“I think I’d be very confident in saying that more cattle will die from bloat than will die from screwworm. First case, okay? That calf didn’t even die, folks. They threw a 20-mile loop, but they went through that whole area. They treated the cattle. And in 48 hours, everything was clear to move,” he adds.
He says It’s not news unless it’s blown out of proportion and consumers react negatively, which so far hasn’t happened.
NWS is not a food safety concern though.
Fund Selling to Continue in Cattle?
The funds have continued to sell the cattle futures and liquidate long positions with open interest down about 25,000 contracts alst week.
What keeps them from selling further technically?
He is watching $243.25 in the August live cattle as resistance that can turn the market higher to take a run at the $250s.
Hogs Lower Except July
Lean hog futures were lower except the July contract which became the spot month after June’s expiration on Friday.
July hogs are seeing an outside day higher off new lows and are extending gains Monday with cutouts up $2.92 on Friday.
However, August and deferred hogs were seeing pressure on technical selling after lower weekly closes.
Meanwhile, the funds added to their short position in the hogs and are now nearly 25,000 futures contracts short in the market.
Kooima says lean hogs have ignored any of the positive fundamentals including disease pressure which has been disappointing and feeder pig prices are running over $115 as a result.
“Now you’ve got a futures market that can’t even get to where the current cash market is,” he adds.
Grains Open Lower Turn Mixed
Corn, wheat and soybeans all made new lows for the move overnight and opened lower with pressure tied to sinking crude oil and the Iran peace deal news, plus weather is still favorable.
However, corn and wheat tried to bounce about an hour after the opening as those markets are oversold.
Funds sold a record amount of grain contracts as of last week’s Commitment of Traders Report, at nearly 120,000 contract in the corn market.
So is a low close in these markets are will funds continue to sell?
Kooima says, “This is not a place where I would think that you should sell the market either on the corn or the
beans down here. I think there’s still time that you can put a little risk in the market. My guess is that the USDA still doesn’t have the right number on the corn planting acres. It’s less than what they think, in my opinion. So we’ll see if that isn’t a factor down the road.”
