Tuesday Morning Livestock Market Summary - Expanded Limits for Hogs Increases Bearishness

GENERAL COMMENTS: 

Technical support for the June contract at the low of $111.60 from Nov. 13, 2018, was nearly reached Tuesday but did not penetrate it. This could be an area some traders could step in to see if a bottom may have been reached. The severe decline makes it ripe for a retracement, but pressure from hogs and the uncertainty from political issues might make this weak support. With hogs limit-down Monday, some traders turned to the cattle complex to spread their risk or to increase their short positions. Cutouts were mixed, which could provide a little ray of hope. Packers are not anxious to bid aggressively early in the week.

Not much can be said about hogs Monday as the market opened limit-down and remained that way the entire day with the exception being front-month May. The entire price rally during the second half of last week may be eliminated Tuesday as traders will continue to exit the market. Futures will have expanded limits, which could erupt in another blood bath before enough is enough. Early bid and offers in futures indicate a lower opening. The increase of tariffs from the current 10% will move to 25% on Friday. This may reignite a trade war. Interestingly, the Chinese trade delegation is still planning on coming to trade talks later this week. Pork cutouts closed higher.

	BULL SIDE		BEAR SIDE
1)	June cattle could not penetrate long-term support at $111.60 Tuesday. Traders may be interested in stepping up more aggressively near that price level in the attempt to pick a bottom. However, close stops will also be placed.	1)	Cattle futures continue to fall, blowing through technical support levels on nearly a daily basis. The next support may not hold either especially of hog futures continue to fall.
2)	Cattle prices are low enough to stimulate demand, causing packers to be more interested in filling orders if feedlots do not hold out for much higher prices.	2)	Packers are unwilling to even bid at even money with last week riding on the potential for yet lower futures this week. A delayed grilling season due to unseasonable cooler temperatures and rainy weather has stymied demand.
3)	The Chinese delegation is still set to come to trade talks later this week. They may be willing to get something done in order to avoid the increase of tariffs on Friday.	3)	Expanded limits in hogs Tuesday may magnify bearishness as traders attempt to get out of long positions. Another limit-down day could unfold for a period of time until the market balances.
4)	African swine fever and its devastation has not gone away and China needs pork to fill their void. Another large purchase could take place despite increased political uncertainty.	4)	Increased tariffs on Chinese goods may result in retaliation on U.S. goods with pork being one of them. Prices would need to decline in order to compensate and accomplish export business to China.

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