Markets Now Early 5/22 Cattle Meltdown Continues, What's Behind It? Grains Add War Premium

Added: 2026-05-23

[00:00:02]I got a couple.

[00:00:03]>> Welcome to Markets Now. I'm Michelle work with Scott Barlick of Kimma Barlay Grains. To the plus side here on a Friday morning while we're seeing livestock mostly lower except for nearby live cattle futures. Scott, thanks for being with me. Wow, we had a tough down day in the cattle complex yesterday with some limit down closes in the feeder market. So, let's start there and just kind of recap what caused all the fun liquidation.

[00:00:29]Well, thanks for having me. And yes, wow was the correct word to use, I think, to start it off because yeah, little bit of >> one of the two.

[00:00:37]>> H yeah, there several words we could use not fit for this show as well, but um down nonetheless. And what we're seeing is, you know, a lot of fund liquidation here. You know, they as this thing rallied, you know, they they follow with stops. You know, if it gets weak enough, you know, they don't try to sell highs, they don't try to buy lows. So they kind of trail those and then when market signals start to change that's when they start just right unwinding. Well we came through Goldman roll time frame which has changed a little bit. It's not like it's just Goldman Sachs that's in there or or some of these funds that we're used to you know always hearing about the Rogers roll those kind of trades. I mean now it's it's a different group.

[00:01:20]we've got, you know, a lot of new funds into these markets, but they were liquidating these contracts rather than rolling it back. Just straight whack out, taking their ball and going home is the way I heard it. And I think that's uh that sums it up. So, I don't know if there's a reason why, but we're start their stops started to tighten up when they got near the highs. They're like, "Okay, we keep hearing these fund stocks are getting closer to the market.

[00:01:45]They're so they're more excited to get out. We've got a stock market that's raging. Somewhere else they can go, but that's what we're seeing. Big fund money push. I think that's just what started the break here and just kind of adding to the pressure as we go down here.

[00:01:59]>> So, the funds may not be done liquidating, especially if you look at the technicals here then, right?

[00:02:05]>> That's correct. We break a neckline on the head and shoulders kind of formation. My least favorite formation, but it is what it is right now. I have to acknowledge it. So, uh, some severe weakness that measures, you know, another $10 lower here on the fats and, you know, broke some of those short-term trend lines. Long-term charts are still, hey, we're at some pretty high levels and we've got some significant room we can break before we test those. So, it's a lot of shortterm damage here. Um, but we're all a little bit nervous. I mean, this is we know these prices are high and everybody wants to know what's the story. Why are we down so much? Well, we are at record highs and when this thing feels like it's going to be done, it's going to be met with some vicious selling. Um, guys that are unhedged, guys that want to press their shorts, I mean, guys pressed funds pressed alongs all the way up. Uh, that's kind of how it can act on the way down. You know, stairs up, elevator down. So, these corrections are are not surprising just because when you look at the grand scheme of things, we're still looking at three and a half bucks for feeders, 350.

[00:03:10]My family's going to make a lot of money if we stayed at these kind of prices.

[00:03:12]These are still great prices. So, it's not that we're looking cheap here yet.

[00:03:17]We're still so high that there's room down. So, I think that's the nerves.

[00:03:22]Maybe this 3-day weekend is going to help just kind of calm everybody down.

[00:03:25]Take a breath. We'll see what happens in the sail barns. We'll see what happens in the cash market and any kind of other new news that that comes out here.

[00:03:33]>> All right. Speaking of news, uh we did have the algorithm headline trading funds uh go after one headline that we had. The Fort Morgan Cargill facility actually had a lockout. Where are we at with those negotiations?

[00:03:50]>> That was kind of the updated rumor or no I guess updated headline headline you use and that that's the word to use.

[00:03:57]It's a, you know, they voted to officially strike this week and that was the headline while it's been closed for four weeks. So, it didn't feel like it was anything new to me.

[00:04:05]>> Nope.

[00:04:06]>> It's just the fact that it just recircled back in there and everybody took it and ran with it. And yesterday was a little bit of a head scratch or like, okay, why why yesterday and today are we down so hard? Because that was earlier in the week that that came out.

[00:04:20]But you start to hear rumors, you know, and I don't have any truth to it, but there was rumors that another plant might strike to help out the Fort Morgan uh uh outfit, help out the union, kind of to support them. And uh that could have been part of the reason why we broke so hard yesterday because that's not something we need. Um I had heard rumors that they put concrete barriers barriers all around the Fort Mc Morgan plant, which kind of says, okay, that's pretty serious. uh that's starting to draw it out feeling a little bit longer and we've always talked about how we already closed Lexington and the Packers still can't find enough cattle losing a lot of money like which plant's going to close next. So now the fear is do they just leave it closed you know which is it's scary not you know we didn't think that that was probably a plant that needed to um it's got some cattle around them you know if it fits the market so not hearing that but that those nerves just creep in there and you're wanting to hear some good news on it but you're not hearing it yet.

[00:05:23]>> Yeah.

[00:05:24]And going back the rumor yesterday about one of the other Kansas plants maybe going on strike in sympathy. They are killing today from what we understand.

[00:05:33]Right.

[00:05:34]>> Yeah. That's that's what I hear is they are going today. So that that's good sign number one I guess. But on the packer front too, we do have, you know, added into that rumor from yesterday was that there was one of the majors that's going to start discounting on some of these heavy cattle and and we've been living on heavy cattle. And the expectations were that hey when we turn the page into these calf feds that that are lighter and guys do seem to want to sell them early. I mean some of those are hitting the show list because some of those bids are for a month out but we're making them big and and then the weights come out yesterday. It's two week old data. We're expecting these carcass weights to start to mellow and maybe slip a little bit. Up seven pounds on steers and a five on heers. It was a little bit of a surprise like okay I guess we're not there yet. Still big.

[00:06:21]But just the fact that one packer wants to start to to discount some of those heavies are talking about it um should send some scares down uh you know a lot of people's backs. We we've lived through some tough times when they start doing that. Um we're at their mercy and that's what's been so hard uh all along the run. So might be quite a few cattle that want to get cleaned up quick if that comes to fruition. There's still other packers saying, "Hey, I'm going to buy them for a month out. You can feed them for another month. That's fine."

[00:06:49]So, we don't have everybody there yet.

[00:06:51]We've heard this a few times during the last year and it it never panned out.

[00:06:57]Didn't work. You know, one packer couldn't do it alone. But if you start to get a couple of them to do it, that that would be a scary thing.

[00:07:03]>> Yeah. And it could be a threat. Just a threat at this point.

[00:07:06]>> Yeah. Um let's talk about where cash developed yesterday. I felt like maybe the market was just a little disappointed with what cash we did have that kind of broke.

[00:07:16]>> Yeah. So early in the week we had a regional out get some 265 bought and uh just bought a few um you know they started at 260 didn't get any 263 and then 265 they bought some got some cattle bought earlier in the got out of the market pulled out. So they're it's like okay feels good that we heard the 265 price but didn't get a whole lot of them bought. So after this last break, we've had uh some 260 traction picked up quite quite a bit yesterday and the day before is when it probably started. Um and those are getting bought for a month out. You know, you're talking the end of May 260. It's getting hard to pass that kind of stuff up when you're looking at a what it was at the time 7 to 8 basis and now it's a $10.5 basis uh for the end of uh of June, end of June. Um that feels okay. That's hard not to take. So, I think quite a few people bit on that.

[00:08:08]Um, the South also was was getting some 260 trade that was happening. Not sure if we'll see much more. Show lists were pretty tight. Um, manageable, I guess.

[00:08:18]Uh, it would probably take that to pull some of more of those cattle out at 260 here.

[00:08:24]>> Okay. The other thing, we have a cattle and feed report coming out this afternoon. First time that we have seen placements above a year ago for a while.

[00:08:33]And so is that another factor that may have contributed to this selloff or is?

[00:08:39]>> Yes, I I think it is a factor. I mean, it's been kind of, you know, we've talked about it a little bit, you know, a couple of weeks ago. Just kind of beware. This this is what it probably looks like. I mean, we're comparing to really tight numbers the year prior, all of these reports, this Mexican border's been shut, uh, you know, to what we're comparing to. So, uh, and now we're going to see it. We had these dry conditions in cow calf country. We had a lot of cattle coming early uh early off of of wheat pasture uh you know lot of different scenarios and blaming a lot of that on the on the drought. So the next two reports here this one and probably the next one are going to show those big placements. So is the market ready to handle that? you know, because we've had supply in our back pocket. You know, that this entire rally higher, tight numbers, tight numbers, that's all we're talking about now. That scale maybe shifting just a little bit here. And then the demand, the other part of it, you know, those two together are both acting a little bit weaker here. So, Catalon feeder port could be interesting. Um, that being said, we've already talked about this quite a bit.

[00:09:46]So, and we've broke quite a bit. So, we are penciling a lot of that into the market. So, it's not like we need to do another limit down day because there's this big placement numbers in my opinion. Um, so we're prepared for it.

[00:10:00]>> And let's leave on a positive note, the uptrend lines are still intact even with the technical damage that we've done to the charts, right?

[00:10:08]>> Yeah. Long-term charts are still okay.

[00:10:10]We've got some trend lines. It's got to break quite a ways to get them. So, we'll have some of if we start breaking anymore, you'll start to hear where those numbers are, where they align. But um got some room yet.

[00:10:22]>> All right. The hog market has been a mess this week as well. More new lows for the move yesterday.

[00:10:28]>> Boy, what is the main reason why we can't get the market to keep going down?

[00:10:32]I know the funds, they've gotten out of a lot of their length already. So, is this fundamental from the cash trade just stalling out?

[00:10:41]>> I wish I knew, Michelle. You know, I that's that's one of the frustrating things about hogs is we feel like, hey, fundamentally, this feels okay. Like I I I'm hearing, you know, packers are not finding c enough hogs. Um having to cancel some Fridays. We've got a lot of disease issues. I, you know, you just hear about another barn right in our area. 60% death loss on this group with pers and just it's been tough, you know, because the supply is tight, but that these hog producers are really going to be struggling if this thing doesn't turn around. And uh I think that optimism was really there because we see the supply problems. Um it just looks like this demand to me just can't pick up. So I'll throw the blame on that. I mean, we're selling beef at these record high prices and you keep hearing we're going to get these beef prices lower. We got to get them down. Well, this whole time while beef prices are higher, here sets pork at an extreme discount. And if they can't get that needle to move with that scenario, uh not sure how else to help it because if beef prices do start to come down, you know, that pork's going to struggle that much more. So, that could be the reason to blame. But when when hogs trend, they trend that they they pick a trend and they go with it.

[00:11:55]So, uh trying to find some confidence.

[00:11:58]We had all the contracts under 100 today. Maybe that's maybe that's a spot we try to boost back up. We're a little bit above it now. Um it got a little bit of a steeper break here on this last break. So that could be a little bit of an exhaustion. So I mean I'm still thinking we got to we got to move these pigs higher, but uh been absolutely wrong there and not sure what hope else I got to throw at it there. Michelle, >> I know it's been discouraging for sure.

[00:12:22]Okay, grains looks like we were down for the count. We came back yesterday as we started to see crude oil back higher and that's kind of supporting us today and maybe a what a little buying here going into the weekend in case this Iran thing gets ugly.

[00:12:36]>> Yeah, I think there's a little bit of war posturing. It it it feels like uh there there's some uh some chest pumped up and maybe that's the the nerves that's wrapping up in the energies.

[00:12:48]We're getting a boost in that energy market and I think that's probably why we're getting a little bit of a boost in the grain market here. Um, we we've saw what grains can do when the energy prices go higher. We know that they they get a nice premium in them and when the energies collapse, so do the grains. So, uh, I think that's probably the lead help today. Um, because everything else you look at, hey, we're getting quite a bit of moisture in some areas that that really needed it. Um it's been maybe some cooler temperatures across the grain belt and so it's a little slower growing but uh feeling okay about it. So I mean as far as our our weather premium there really isn't anything there to be had yet. So it's going to have to be these energies that are going to going to pump it up and and then the China news just kind of wore off. Michelle, I mean, it was we got all excited that there's going to be some big trade and then, you know, nothing really happens and then you hear, well, China doesn't actually say that they agreed to anything. So, we had to take that kind of back out of the market. So, all on energy. There you go. Long answer short.

[00:13:50]>> Okay. Well, hopefully we can hold some of these support areas longer term because otherwise this thing could see a lot more fund liquidation. The funds were pretty long here, weren't they?

[00:14:01]Yeah, there was some pretty good liquidation on those days that we broke.

[00:14:04]It was kind of surprising the estimates that you saw on how many they got out of. So, it's not like they're feeling really strong being that long here.

[00:14:12]>> Okay. Well, let's hope they're done liquidating. Thanks so much, Scott Varlic with Quaquo. Varic markets now.