Morgan's Markets Logo

Jan. 15, 2019

A few weeks ago, I mentioned that the weekly cattle and feeder cattle charts looked like they put in highs. Last week we went up and challenged those highs.

If we do not push higher this week, it looks as if we will reinforce that thought.

We have had a cattle market that has moved back and forth — looks awfully strong at times and then weak later on. The feeder cattle market is the same.

Generally the first two weeks in January are when Midwest cattle feeders fill up their lots, and this time tends to create the best markets until you get to April.

We are currently forming a head-and-shoulders formation on the feeder cattle. If it follows through, we could be at $137 for March and April feeders. To negate this, we need to start closing over $147.80 basis April feeder cattle futures.

Composite box meat movement came out with negotiated 22-day-and-up meat sales at 1,013; NAFTA exports were 165, and overseas, 451. This is under the 700 for NAFTA and overseas that I consider necessary to show foreign exports are still healthy.

We traded cash cattle last week at $123-$124, with a few higher, and $195-$197 hanging — pretty much a steady market. I still feel that we need to watch the weather, but don’t get lulled into the complacency that this market can go higher simply because you own the cattle.

We are currently having a PRRS breakout in the northern Iowa area where a lot of hogs are being raised, and it seems to be of the severe type. I think the price of June/July hogs in comparison to February have this built in already.

We generally get a rally on the spring hogs into Valentine’s Day. This is also the day February futures go off the board and it’s when you want your spring hogs hedged by, for the April contract.

We currently have 800,000 government workers unemployed and/or working for no paychecks. We have a farm economy that is waiting for tariffs to be taken off, and a general economy that is probably getting ready to move into a lower gear. The farm economy has always front-run the nonagricultural economy.

We continually become more disenchanted with the length of time it is taking to settle these tariffs. The American public is being held hostage. Those who thought the tariffs were going to be a brief inconvenience have found themselves to be wrong. The American dollar has probably topped out and will have some rallies, but it had been a haven for those who feared what may happen in the economy because it is considered a pretty stable item.

We may have had foreign governments bringing in bigger imports of American items if they thought the tariffs were going to be raised the first of January. This is the same thought for exports. Jamie Dimon, CEO of JP Morgan, said that if the shutdown continues through the first quarter, the economy’s growth would probably be 0 percent.

The American cash grain farmer is now starting to lay out what he is going to do this year. Quite a few areas did not get anhydrous applied. I would consider what the higher-priced anhydrous has done in the last 30 days to be a caution against going corn-on-corn this 2019 crop year.

We have a tremendous amount of livestock on feed, both here in the United States and abroad. I would look at the corn market and consider any breaks as a good place to own corn based entirely on price.

We sent a letter to our clients with our thoughts on the next 90 days. If you would like one, give us a call.

Good luck and good marketing.

This weekly report is for informational purposes only and is not to be construed as an offer to sell or a solicitation to buy the commodities listed herein.