Cattle futures are lower early Friday with hogs and grains all rallying.
Cattle Correct Despite Strong Cash
Scott Varilek of Kooima Kooima Varilek says cattle futures opened lower Friday morning but have since recovered.
Thursday futures saw a routine profit taking correction, despite strong cash.
Cash developed in the South at mostly $230, a few to $231, Steady to $1 higher than last week. In the North live sales ranged from mostly $240 to some $242 and dressed from $376 to mostly $380, which is $1 higher than last week’s weighted averages in Nebraska.
However, Varilek says the cash market felt “heavy” and that is not unusual as we are in the dog days of summer and beef consumption starts to cool.
Choice boxed beef on Thursday was up $.43 but has corrected over $20 off the highs putting packer margins in the red.
Packers Slow Kills and the Market Feels Heavy
As a result, packers were not as aggressive buying cattle this week and they are slowing the kill again to prop up margins.
“We have a couple of regional packers that are dark today and a few more will be on Monday,” he explains.
Funds are still near record long in the cattle futures and have been defending their long, especially with the huge discount the futures are holding to the cash and tight supplies.
That has been reinforced by the closing of the Southern border to Mexican cattle imports and a slow down in Brazilian beef imports ahead of a proposed 50% tariff on imports.
Lean Hogs Higher But Can They Break Through Resistance?
Lean hog futures are up for a third day with a push from a counterseaonally higher move in the Lean Hog Index and stronger cutout values.
However, the market is still in a trading range and the big question Varilek says is does the market have enough strength to get through chart resistance?
He says the rally is still tied to fund buying and tighter supplies due to disease and so there is hope eventually the market can make new highs.
Grains Rally on Weather or Is it Technical?
Grain markets are all trading higher on Friday but is this weather market or just technical?
Extended forecasts show a heat ridge building in next week and there have been some concerns about pollination emerging from overly tight tassles.
However, Varilek thinks the market is seeing technical buying as the bulls gun for chart gaps that are currently sitting at $4.32 3/4 on the December corn and $10.44 1/4 on November soybeans.
“I think the weather has been fairly ideal for crop development and those pollination issues are not widespread. So I see this move as a pricing opportunity for farmers,” he adds.
