Tuesday Morning Livestock Market Update - Tariffs Have Been Delayed for a Month

GENERAL COMMENTS:

The extreme bearishness in the feeder cattle futures was due to the resumption of feeder cattle imports from Mexico into the U.S. The other part of the equation was the tariffs that were to be imposed on Canada and Mexico and the uncertainty of what that was going to do to beef exports. However, the tariff situation changed throughout Monday. Both President Trump and Mexico agreed to put tariffs on hold for one month. Later in the day, Canada also is making commitments, putting tariffs on hold as well, pausing them for at least one month. That could significantly change the market Tuesday as the delay of those tariffs might result in some buying interest as traders may get back into the market to take advantage of the lower prices. There is no doubt futures will remain volatile in the near term. The overall fundamentals of the cattle market have not changed. Boxed beef prices were higher with choice up $4.31 and select up $2.77 indicating continued strong consumer demand.

The potential for tariffs hit the hog market hard but that may follow the same pattern as cattle now that the tariffs have been put on hold for 30 days. Cash prices were not released Monday due to packer confidentiality. We did see cutout values down $0.94, continuing the uncertainty of overall demand. The February contract closed $.15 higher as it needs to stay in line with cash due to it moving closer to expiration. Later contracts were hard hit with triple-digit losses, taking the June contract below $100 and July remaining just slightly above $100. The whole complex was under a bearish cloud Monday but with the lower prices and the change of the tariff news, traders may step back into the market to buy the break.

	BULL SIDE		BEAR SIDE
1)	Tariffs with Mexico and Canada were put on hold for 30 days, which could result in traders becoming more aggressive buyers of cattle futures Tuesday as they want to take advantage of the break in prices.	1)	The resumption of cattle imports from Mexico this week may leave traders cautious. The selling pressure could continue Tuesday.
2)	The bullish numbers on the cattle inventory report should provide support under the market. Cattle supplies are tight and will remain that way.	2)	The feedlots may be anxious to sell cattle this week in case further bearish news surfaces. They may have less desire to hold cattle longer than necessary.
3)	The tariffs with Mexico and Canada being put on hold for 30 days could result in traders stepping back into the hog market to take advantage of the break in prices.	3)	Lower pork cutouts do not indicate demand is increasing and may limit the upside price potential.
4)	The packers are expected to be more aggressive in the cash market as they need to purchase hogs to maintain slaughter.	4)	Traders may not be anxious to buy hog futures aggressively do to the uncertainty over international demand.