Cattle and hog futures experienced an increase early on Friday, while grain prices showed a mixed pattern.
Cattle futures surge due to significant rise in cash
Live and feed cattle futures saw a spike on Thursday, with buying momentum carrying into Friday morning. This surge was largely attributed to a notable uptick in cash sales in North Korea. According to Scott Varilek and Koima Koima Varirek, Thursday’s live sale price reached $220, which is a $10 jump from the previous week, with some transactions in Iowa hitting $222. Dressed trade prices ranged from $340 to $345, marking an increase of $11 to $16 compared to last week’s average, although prices in the South remained stable.
“It felt really good. People are culling cows for $220, and we even got a $222 sale after the close. It was nice having some local buyers involved. It’s encouraging to see major players in the northern market pushing prices up. The cash news is really what’s driving this momentum,” he noted.
Cash suppliers dominate with record pricing
Varilek remarked that the feeder cash market is seeing record prices at auction venues like Bassett, Nebraska, which has propelled the increase in feeder cash sales. “This is the first indication that big players are returning to the market, and we’re hearing prices that are quite astonishing again,” he explained, noting that the trend has been consistent throughout the week with prices continuing to climb. He pointed out that some items sold for more than $5, a record high, indicating a tight supply. “We’ve been feeling the impact of this,” he added.
He mentioned that the break-even point sits between $240 and $260, which raises some concerns, particularly for heavier weights. Still, producers are keen to turn a profit and restock their yards. “The feeder market is what got us to these record highs. It’s what keeps driving us,” he stated.
Reports about a new case of the New World spinach worm occurring 190 miles from the Mexican border also supported the price increase. However, Varilek indicated that the current market trend isn’t resembling past patterns. “Most of the negative news seems to be priced in already,” he commented.
Potential price peaks
Live Cattle and Feeder Cattle Futures have had a robust week, climbing past the 38% retracement level, and are now looking toward the 50% retracement and major moving averages as resistance zones to surpass for further gains. There’s also the question of whether the market will rise to close the gaps left from previous declines. “Those gaps seem so distant, but suddenly they’re in reach. We’re eyeing a gap a bit over $230 in February. Are we sure we’ll close them? Not at all. But the better we perform, the more likely it is,” he speculated.
Packers’ profit margins
Varilek expressed optimism about feeders regaining their influence in the cash market, but raised concerns about the potential effects on packers’ margins connected to $220 cash rates. Recently, packers had returned to profitability, benefiting from adjustments in the cash market. “Good question. Some retailers, packers, and producers are turning a profit, so adjustments will be necessary. It’s encouraging to see all parts performing well right now. However, it’s been frustrating hearing that beef prices are deemed too high—we’ve got to consider the broader price picture,” he noted.
Pork markets show recovery
Lean hog futures have climbed this week, fueled by short covering and the upswing in cattle prices. The Lean Hog Index is also rising, signaling potential seasonal lows. Varilek suggested there are more factors at play, commenting, “There’s an intriguing narrative surrounding pigs. We were in a tough patch with the downward trend, but we’ve managed to halt that decline. Now, introducing diseases into the pig market adds to the positive outlook—I think that’s significant,” he said.
Grain sales remain steady regarding China
Corn and soybean prices were mixed on Friday as both commodities held steady. Soybean sales have surpassed 17 million, with much attention on soybean export sales to China this week. Market sentiment has been affected by Bessent’s remarks about extended purchases running through February instead of December. “It feels like we keep revisiting the same issues with grains,” Varilek said, noting that while the year looks promising, weather reports can quickly shift the narrative. “Currently, it’s rainy. But somewhere it’s too dry or too wet—those factors will impact the market. We need some news to stir things up.”
Yet, he acknowledged that South American weather forecasts usually garner more market focus in January. “It seems early, but in such a stagnant market, we’re on the lookout for anything,” he added.
