Livestock were leaning higher early Friday. Soybeans higher and corn and wheat mixed.
Cattle Recover With Record Cash
Cattle futures were higher on Friday after recovering well off the early lows on Thursday.
Scott Varilek of Kooima Kooima Varilek says cash trade developed in the South at $256 to $258, up $2 to $3.
However, in the North trade started at $256 but by the end of the day trade was all the way up to $260. Dressed prices ranged from $400 to $405 with the volume at $402, up $3.
He says it was unexpected after the $10 to $12 higher cash last week. “That was the surprise, the highlight from yesterday where we have markets that are crashing in a big, big fashion. Then all of a sudden we started to hear some cash bids in the South and it was $256 in Kansas or Texas. And then all of a sudden it was $257 up to Kansas, then $258. Then you’re getting $260 rumors around the North. People start asking $260 and some guys got it. It was, wow, never been higher cash,” he details.
That brought the board back on Thursday and helped with the early rally on Friday.
He says the record cash cleaned up the showlists and packers were buying for delayed deliver as well, which is bullish.
“I heard the $260 mainly in the North, you know, it kind of started in Western Nebraska, but they sell with a 4% shrink there. And then when it kind of finally came to Eastern Nebraska and Iowa, that’s with a 3% shrink. So that’s even a better price yet. I didn’t hear a mountain of anything, I guess, as far as the South goes at $260, but they trade such small numbers anyway. I guess it wouldn’t surprise me if they did. But we’re likely done,” he adds.
Cattle Market Broke on Brazil Import Fear
“Yesterday’s news was the Brazilian president coming up to the White House to meet with President Trump. And I think that just started some fears, that are we going to import some more beef raise the quota so we we can bring more in because President Trump says beef’s too high,” he explains.
So the market reacted and turned significantly lower.
However, by the end of the meeting Varilek says they didn’t address beef and agreed to keep talking.
“So, we saw a big recovery yesterday as it kind of started to diminish those fears just a little bit on that news.”
DOJ Probe
There was also increased talk about a DOJ probe into meat packer price fixing which may have also spooked the market.
The Assistant Attorney General detailed actions against AgriFax for price fixing in the pork, chicken and turkey business and how that would be used as a precedent for the beef packing industry.
He says, “I think that’s just some extra uncertainty we’re throwing on the market. You know, I think we all look at the big four and, you know, us that are in the production industry, we understand that that’s been frustrating for many, many years. And, you know, where you want to say, yeah, that sounds like a great idea. It just makes you a little nervous. You know, the government’s getting involved. If they swing a big stick, it could really change the whole scheme of things, I guess. And just that uncertainty that circles around it is a little bit scary. So what does that look like? We’ve got some foreign-owned packers. We’ve got the big four that we talk about all the time and love to complain about. But just when their hands get in there, I think you’re a little bit nervous just what the outcome could be there.”
Retest the Highs?
So can the cattle futures retest the all-time highs with the help of the cash news?
Varilek says the one thing that may hold the market back is boxed beef values. They were lower on the close yesterday and while the negotiated totals are a small part of the actual sales, the trend is concerning.
“Just the prices that we are seeing are pretty lackluster and in the height of our demand season we’ve got Mother’s Day weekend coming up. The choice select spread negative and not seeing any major you know rallies in these boxes that’s a little bit alarming,” he adds.
Next Cattle on Feed Report
The other factor that could start to turn the market sentiment is bigger on feed and placement numbers in the next Cattle on Feed Report.
He says, “We’re going to have to start getting used to that just a little bit as we’re comparing to historical tight numbers from the year prior. So wondering what that does to the market. Does it start to drop off those deferreds as we see more numbers, get used to some, you know, seeing some of those on feed reports that aren’t just super duper friendly. So I think that’s something to keep an eye on here. We already have the deferreds kind of holding back. you know, thinking there’s more numbers coming, it’s going to happen later. And it kind of creates that bull spread market when, well, cash is still $260. So I guess the front’s got to stay up.”
He also expects numbers to start to creep up with the drought and some cattle being sold early due to the lack of pasture or some cows being culled.
“We culled this cow herd really hard two years ago. Last year really kind of took that off. I think started to rebuild, keeping those cows back. keeping some heifers back, and that’s going to give us some long-term hope that we’re going to get some supply back. But the only other factor is it’s dry in cow-calf country. Grass is running a little short, so does that kind of start to kick the can down the road? And maybe we’ve got to bring some of those extra numbers back into town early,” he further explains.
Cargill’s Fort Morgan Plant Dark
Meanwhile the Cargill plant in Fort Morgan is still dark as workers are still not back to work but the market has really faded the news.
“And not hearing anything about it. It just seems like, you know, the Greeley plant was in everyday news and we talked about it. We maybe had more to talk about. This one doesn’t have any news and we’re just kind of brushing it off,” he says.
Hogs Mostly Higher
The hog futures were mostly higher Friday except for the spot month as Varilek says the back months are still building in premium on tighter supplies tied to disease.
Still the cash market has not taken off so the futures are being bear spread.
“Supply traders are all starting to push disease back to more through July and October that’s what it looks like now,” he adds.
PRV Export Restrictions
The front end of the cattle futures are also pressured by the news that Mexico is looking at restricting U.S. pork variety meat imports due to the cases of Pseudorabies in Iowa.
“Mexico talking about curbing some exports and making some different requirements for us. So, that’s a little bit of ripple effect that’s starting to happen is that’s there there could be some effect and you’ve got pork we rely on exports for that industry. So, Mexico being our number one customer that’s a that’s a one to swallow,” he says.
Grains Try to Recover
The grain markets have had a tough week trading lower with the energy markets on a possible cease fire with Iran and opening of the Strait of Hormuz.
Iran rejected the deal so energy markets recovered on Thursday and are around steady on Friday.
That is helping the grain markets recover.
“And I think it just shows you how much war premium is in that market. You know, the energies were really on fire at some very high levels. And when they started to correct mainly because there’s more ceasefire hopes there’s hopes that we’re going to going to make a deal took the wind out of the sails of those energy markets and grains absolutely followed that down,” he says.
Corn and soybeans held support on Thursday on the charts and so they are bouncing off those levels but have retreated down to the lower levels of the trading range.
WASDE and China Summit
The markets may also see some positioning going into the end of the week, and with the May WASDE and the China summit scheduled for next week.
Varilek says the China trade hopes should support buying in the soybeans but the WASDE may not be that friendly.
“You know, we always get that reminder of our ending stock number and how much supply that we have. And hopefully it’s a surprise. And we’ve really started to chew into it from some of this increased energy demand,” he says.
He is also expecting lower wheat production estimates from USDA based on poor conditions in hard red winter areas and with the Kansas Wheat Quality Council tour likely to confirm lower production.
