Livestock futures were higher early Monday with grains leaning lower except for corn.
Cattle Try to Bounce
Cattle futures were trying to bounce early Monday as both live and feeder cattle are oversold after lower weekly closes.
Brad Kooima with Kooima Kooima Varilek says the key will be whether or not the market can hold the gains as it continues to digest all of the headline news from the Trump administration’s beef plan.
He says last week the market tried to rebound several times only to meet more fund liquidation and selling.
“I don’t think anybody’s memory is too short to remember last week, we’d start higher then never closed good. So, anyway let’s hope we hold it today,” he says.
Trump Beef Plan
The market has continued to try to digest the ongoing Trump administration’s beef plan rhetoric which resurfaced on Friday with President Trump posting on social media how he was going to loosen the regulations so farmers and ranchers could sell their own beef and he was going to challenge the four big meat packers who controlled 85% of the market.
This followed backlash from cattle producers who were angered by the administration allowing 300,000 metric tons of tariff free beef into the U.S. over the next 90 days.
Monday morning USDA released their Ranchers First Initiative, building on their previous plans to help rebuild the cattle herd. There were also more details released on the beef import plan according to Kooima.
“It was a very long-winded release press release about how this 300 000 metric tons is supposed to work and I didn’t feel any smarter after reading it three times than I did before. There’s still quite a bit ambiguity in terms of trying to understand how the plan would lower beef prices 25% and who really is going to be policing that,” he says.
He points out that cash cattle are $40 off the highs and so the market is already doing its job and there is some herd rebuild happening.
“There was a mistake closing the border as long as they did. But, you know, I’ve said that over and over. So whatever. Now, just stay out. And this idea that you’ve got to incentivize somebody, pay him to hold a heifer. Give me a break. We are paying him. The calf’s worth $3,000 a head. I mean, if he hasn’t been economically incentivized already, these people think they can make it rain. I mean, where they can’t hold a calf is because where they don’t have feed because it’s a drought. I don’t know. I worry about the lack of understanding of the true situation,” he says.
Ranchers to Process Own Beef?
The president’s remarks on Friday showed a lack of understanding as he claims allowing ranchers to process their own beef and sell it to their neighbor would solve the beef shortage.
Kooima says it will do no good. “What about the guy that’s got to do 1,000 of them or 10,000 of them? I mean, this whole thing of being able to buy from your neighbor. I mean, I sell some beef, but it has to go to a federally expected locker, right? It has to be ambulatory. There is a certain thing about food safety that has to have some discussion here, does it not? I mean, there’s ways to do that right now.”
He thinks its just hyperbole to try to deflect the anger among cattle producers about the 300,000 metric tons of beef imports coming in.
Imports Go Into Food Service Not Retails Stores
While few details are known those beef imports will go into food service and not retail outlets, so it won’t help lower beef prices at the store.
“Who’s going to benefit? Is that consumer? Are you going to go to McDonald’s and they can say, well, can you get this quarter pounder for this price? But if you buy this stuff with this crummy meat from Brazil or wherever it’s from, then we’re going to charge a different price. I mean, come on. I’m sorry. I’m so wore out with this story. It’s unbelievable,” he adds.
Cash Lower Last Week
Cash trade suffered again last week and in the South was at mostly $222, down $3 to $4 from the previous week. Northern trade was at $218 early in the week, then jumped to $220 with a few up to $222, but mostly $5 to $7 lower. Dressed prices were at mostly $345 down $10 to $11.
Koomia thinks cash will be lower again this week as packers are long bought in the North, through the third week of September. Then closer to October packers will use formula contracts.
“We’ve talked about that one word thing so many times, leverage, right? And it feels as though we don’t have it anymore like we did in the past, at least. You know, a lot of these cattle went on feed consciously with the idea that we’re going to make them big because that’s the way we can lower our break even. Now, this change in the price of corn may impact us a little bit and as we’re starting to see a change in the price of replacement cattle, it could also change that a little bit. But at this point right now, I think the temptation for the guys is these cattle don’t make money so they’ll feed them another week,” he says.
So, he thinks cash could be rough for the next couple of weeks before a strong seasonal kicks in at the end of September into October that could rally the market.
Packers Increase Kill
Packers did increase kill 19,000 head to 524,000 head last week. That pressured boxed beef values with the Choice down $5.13 on Friday and down $9 for the week.
“542 kill, it’s biggest kill, I believe, since early May. And what happened, of course, was you had a packer that was incentivized because he was making money for the first time in a while. And so he upped the kill, even had some Saturday kills, had some outfits that were killing four days a week, killed five days a week. And you saw it in the slaughter,” he says.
However, it resulted in lower beef prices. He adds, “For now, I’m disappointed because boxes obviously down another $5.13 on Friday. Lost a lot of the shine there. I think there’s still margin for the packers. So we’ll see what transpires here into this week.”
Border Reopening
The border reopening has continued to pychologically hurt the market says Kooima, even though the numbers have not been huge.
“Is 620 cattle in a day going to ultimately make a big difference probably not,” he says, “The reopening though went smoother than expected to a lot of people. Now this week we go from 700 max which we don’t think there was even any day we’ve got quite to 700 now it’s 900 this week and it’s 1,200 next week and then 30 days from the first one opening we got a second place that’s going to open in another 30 days,” he explains.
Reading between the lines he says USDA Secretary Rollins was at Nogales he says. That’s an entry point that wasn’t even on the list.
“One that I believe in 2024 made up 13% of the imports and it’s farther west than Douglas, Arizona. So it’s even farther than, you know, the epicenter of the screw worm thing as a potential other point that they might list as a point of entry. So it feels a little like, again, some of this might be related to this latest announcement about the 300,000 metric tons. It looks to me like that border is coming open and it’s going to come in open quicker and it’s going to stay open. That’s how it feels,” he adds.
Hogs Build on Reversal
Lean hog futures were higher on Monday morning building on a key reversal from Friday.
This comes as the funds are short over 31,000 contracts again and increased that position by nearly 7,700 last week.
Kooima says he thinks the market is trying to bottom after being beat up.
“Classic looking key reversal on Friday. Big outside day. And then now big follow through. We almost gapped higher today. It didn’t take us very long to get to the first level of resistance here, unfortunately. Knocking at the door, the 40 and the 50 day moving average.”
However, he says the pork demand is still sluggish, especially with China not a big player in the export market as they downsize their own herd. Domestically demand has also been weak.
Grains Consolidate
Grain markets were mostly lower except for fractional gains in corn on Monday. It is end of the month so the market was seeing some profit taking and farmer selling.
The corn market was quickly bought but Kooima says there are concerns about how much further the funds want to push corn as they are near to record long already and with the possible SRE announcement expected from EPA.
Kooima says, “Very resilient. We’re overbought. We’ve had a big, big move. You know, we got crop ratings today. People some people still care about that. I guess I sort of do. Although this time of year, I can’t get over how quick the crops dying around us here. So but the number one thing to talk about there. I believe we’re at record length on the funds. If not, I think the next commitment of traders will show that we are. The funds are along the corn. And I don’t know. There are people that will argue with me, but I would just be on the side of the funds and not trying to outsmart when I think they’re going to magically get out. The fund being long like that is very, very supportive, in my opinion.”
