Cattle Volatility Meets Grain Market Uptick in August

The cattle market entered August with more questions than answers after a volatile July. Scott Varilek of Kooima Kooima Varilek in Sioux Center, Iowa, noted that despite some packer interest and prices reaching $235 to $236, the market struggled to hold gains throughout the week.

Varilek attributed the market's instability to thinner open interest, which means there is no large fund presence to push prices firmly in either direction. He also pointed out that late August and September tend to bring weaker demand, making it crucial for producers to take advantage of current demand while it lasts.

On the supply side, Varilek highlighted a shift he has observed over the past three years: cow slaughter numbers have dropped off as ranchers try to hold cows back for another calf. This trend, combined with tightening feeder specials, suggests that heifer retention is finally underway after years of talk without much movement.

In contrast, lean hogs offered little excitement, with Varilek describing the cash and cutout as sluggish and pork failing to capitalize on record beef prices and strong beef demand. With tighter hog numbers now giving way to more seasonal supply, he expects continued grinding pressure and said the lows are within reach if that lack of performance continues.

Meanwhile, grain traders are bracing for next week's August WASDE report, which will incorporate FSA crop acreage figures earlier than usual. Varilek believes early insurance data this spring suggested more of a shift toward soybeans than the market has fully priced in, given how high fertilizer and input costs pushed some growers away from continuous corn.

Mike Castle, senior commodities economist at StoneX in Kansas City, agreed that demand is the more compelling story heading into fall. He pointed to another strong week of new-crop soybean flash sales to China, totaling roughly 1.116 million tons, or about 41 million bushels, over five trading days.