Cattle futures rallied on Friday in a holiday shortened session, with hogs mostly lower. Corn and soybean futures were also higher, wheat ended mixed.
Cattle Stage Comeback to Close Higher for the Week
Cattle futures were sharply higher again on Friday with live cattle up $4.55 to $5.58 and feeder cattle up $8.72 to the $9.25 limit. Scott Varilek with Kooima Kooima Varilek says the cattle futures were also up for the week with December live cattle $1.02 higher and February up $3.07. January feeder cattle soared $9.75 and March was $10.80 higher.
Varilek says it was an impressive end to the week in the cattle futures considering Monday’s limit down closes in reaction to the closing of the Tyson’s Lexington, Neb. beef plant and the cut to one shift at the Amarillo, TX facility. The market saw this as negative creating massive fund liquidation. The news of the additional 40% tariff on Brazilian beef imports being lifted was also a bearish factor for the market.
However, as the week progressed and the market digested the news the futures were able to hold and bounce off some key support levels.
USDA Secretary Reaffirms Staggered Reopening of Mexican Border
The other news that helped provide some reassurance to fund traders was USDA Secretary Brooke Rollins provided some clarity that the re-opening of the border to Mexican feeder cattle would not come all at once but would be staggered with Arizona being the first port of entry to allow imports. “That at least helped establish that the whole 1.2 million head of cattle that annually come across from Mexico would not be moving all at one time,” he explains.
So Is The Bottom in the Cattle Market?
The question now is was this just a correction of the oversold status in the cattle markets or not? While a higher weekly close is positive, Varilek says recoveries often come in three day waves. “So we need to see some follow through buying on Monday to confirm a short term low,” he says. Varilek points out that volume was light at the end of this week due to the holiday and on Friday morning the CME Group had a server problem that may have also kept some of the algorithm traders on the sidelines which may have further exaggerated the move.
Cash Trade Improves on Friday
The other equally impressive part of the three day rally lies in the fact it came in the face of lower cash trade. Early week sales ranged from $5 to $15 lower than a week ago. Even though futures are at a discount to the cash it was still surprising how well the futures shook off the bearish development. The good news is by Friday cash trade did improve in the South to $220 live, which was just $2 to $4 lower than last week versus the $215 earlier. Northern trade was mostly wrapped up at $330 dressed, down around $13 from the previous week’s weighted average, while live sales ranged from $208 to mostly $210.
Lean Hogs Trying to Bottom?
Lean hog futures were lower on Friday ending a three session rally. However, the market was able to post higher weekly closes, with December up $2.80 and February gaining $3.30. So Varilek says the market is starting to feel like it is trying to put in a bottom technically. He adds that there are some disease issues that are starting to re-emerge in the major swine production areas and cutouts have also been moving higher the last few sessions.
Corn and Soybeans Higher Friday and For the Week
Corn and soybeans built on Wednesday’s rally and closed higher Friday and for the week. March corn was up $.10 1/4 and January soybeans were up $.12 3/4.
Export Demand Supportive
Soybean bulls got some help from a flash export sales of 11.5 million bu. of export sales to China after a news story from Reuters on Wednesday that China had bought up to 10 cargoes of U.S. soybeans after President Trump’s Monday call with Chinese President Xi. Trade talk put that soybean export number as high as 15 cargoes, but at least a portion was confirmed. However, USDA also reported a 10.8 million bu. daily sale of corn to unknown destinations. Varilek says demand continues to help support buying in the grains.
Will Funds Keep Buying in December?
With the start of a new month and possibly new money in the portfolios of managed money traders could there be new buying interest in the grain markets? Varilek thinks that is highly possible but soybeans will need to be the leader. “The soybean bulls will need to be fed by China export business or a South American weather issue. A rally in soybeans could also help spark buying interest by the funds in corn especially if export demand stays robust,” he adds.
