Cattle futures are mostly higher early Monday morning as well as the grain complex, hogs are mostly lower.
Cattle Show Signs of Bottoming?
Live and feeder cattle futures are extending gains after a higher close on Friday. Brad Kooima, Kooima Kooima Varilek, says he is encouraged a low may be forming in both markets. The reason is the support areas that held on the charts last week. While the bears point to another week of lower closes, he says the breakout point in July when both markets took another leg higher is holding technically.
“If you look at February live cattle the low last week was $215.02 and the breakout point on the July 4th weekend was around $215 which is promising and for January feeder cattle the low was $311.40 last week which also coincides with the breakout point of $310.” he explains.
Cash Market Showing Bullish Signs
The fed cash market is also showing some bullish signs according to Kooima with cattle trading on Friday at $225 in the North and those cattle being shipped to other packing plants outside of the region. Dressed prices in the North were mostly $360, up $2 from the weighted average in Nebraska the previous week. Meanwhile, the South traded mostly $232, down $3 to $4.
DOJ Investigation Launched
The rally comes on the heels of and maybe even in reaction to President Trump and the Department of Justice announcing on Friday they were launching an investigation possible price fixing by the nation’s meat packers. This is part of the President’s plan to lower beef prices at the store for consumers.
However, Kooima says he’s skeptical of the investigation uncovering collusion because of the past history of those investigations. He points to the probe launched after the Holcomb fire in Kansas and the disconnect between record boxed beef prices and record low cattle prices during the height of COVID. “Those studies never uncovered anything abnormal to prosecute the packers on even though Three Blind Mice could have detected price fixing in those circumstances. I am all for the producers but I am not very hopeful this time around,” he says.
Kooima says if the big four packers that control 80% of the beef packing industry were broken up it could have positive long term implications for the market but short term the disruption could be a nightmare. Still he says if the investigation leads to improved price transparency he’s all for it.
Lean Hogs Struggle
Lean hog futures are mostly lower except for the December contract which has to align with the Lean Hog Index which is currently at $89.73. However, Kooima says the back months are making new lows for the move and technically the charts are beat up. Additionally, he says the slaughter numbers have rebounded with less disease problems. “You just don’t have good enough demand for the increase in supply we are currently seeing. When the only good thing you can say about the futures is they are oversold, you’re in trouble,” he points out.
Grains Mostly Higher on Hopes for Government Reopening
Grains are mostly higher Monday morning on hopes the government will soon be reopened after news reports Sunday night the Senate had enough votes to move the Continuing Resolution. The key will be if the House can do the same.
However, Kooima says that is holding up the grain markets with ideas we may soon get some bullish USDA data to help support the futures. That would include lower yields in the upcoming USDA crop production report and flash sales showing China purchases. Corn was trading two-sided as the December contract was running up into chart resistance he adds.
