Cattle are limit down early Monday, hogs slightly higher and grains are quietly mixed.
Cattle Limit Down
Live and feeder cattle futures opened limit down on Monday. Brad Kooima with Kooima Kooima Varilek says it was no surprise with news after the closes on Friday that Tyson Foods will be closing its Lexington, Neb. beef processing plant on Jan. 20 and the Amarillo, Texas plant will go down to one shift.
Kooima says the Lexington plant has a capacity of around 4.400 head a day but was only slaughtering 3,700 to 3,800 head with the tighter numbers. He says the Sustainable Beef Plant at North Platte, Neb. is 60 miles away and is currently slaughtering 1,100 head but will be increasing the plant’s chain speed to 1,500 on Jan. 1.
How Low Will Cattle Prices Fall?
He says this is a negative psychological blow to the cattle market and so the limit down moves were expected. He says the next support areas on the charts are around the breakout areas from July when the news started to circulate about Brazilian beef tariffs being applied.
“Feb live cattle, were at $250. Okay. We’ve got a $43 break already. That’s a lot. Even the Holcomb fire, a 7% price, drop in price. If you’re going to do that kind of a maximum break like that, some place, give or take $200, sloppy figuring. Where were we, 4th of July weekend before the thing really accelerated out of there? Some would say partly because of the Brazil tariffs. Well, we were just below $210 on Feb live cattle. We were just below $300 on January feeders. I hesitate to put numbers out there because it’s a raw guess and because the market was not in great shape before the news on Friday afternoon.”
Bullish Cattle on Feed Overlooked
The USDA Cattle on Feed Report was bullish but has been largely forgotten with the packing news. The number of cattle on feed as of Nov. 1 was estimated at 11.7 million head, which is at 92% of a year ago. The placements came in at 90% and the lowest since the series began in 1996. Marketings were at 92% which is also the lowest in 10 years.
Hogs See Short Covering, Spread Unwinding
Lean hog futures are slightly higher on short covering and spread unwinding with cattle.
Grains Mixed with Soybeans Testing Support
Soybeans are slightly lower and testing support despite another 4.5 million bu. of soybeans sales to China confirmed. Kooima is not sure how much more business the market will need to see to get the fund traders to resume buy as this was a classic buy the rumor, sell the fact reaction.
Corn futures are steady to slightly higher but have also been testing support on the December and March contracts that needs to hold he says. However, news and volume are light as it is a holiday shortened trade week and first notice day for December contracts falls on Friday, so longs have to be liquidated by Wednesday. That could limit any bounce or recovery in the corn market.
