Tuesday Morning Livestock Market Update - Markets May Have Tariffs Factored In

GENERAL COMMENTS:

Cattle futures bounced off their lows on Monday but could not find sufficient buying interest to move futures into positive territory. The implementation of tariffs on Canada, Mexico, and additional tariffs on China on Tuesday has put pressure on the market. China will retaliate beginning March 10 with a 10% tariff on beef and pork among other agricultural products, with 15% on chicken, wheat, and corn. It is uncertain whether this will curtail demand for these products, which will be more expensive. However, higher prices may result in consumers purchasing less of it. It is uncertain whether the market has this already factored in. Boxed beef prices were higher Monday with choice up $2.10 and select up $0.36.

Hog futures closed with minor gains Monday after initially making new lows. It is difficult to say whether the liquidation has run its course or if further weakness will be seen. The implementation of tariffs Tuesday may put additional pressure on the market as China will retaliate with 10% tariffs on pork beginning March 10. They are a large importer of pork and the impact is difficult to determine. Higher prices may curtail demand, leaving more pork to be absorbed domestically. The market may already have this more than factored in and could see further gains today. The National Daily Direct Afternoon Hog report showed cash down $1.61. Pork cutouts increased $1.37.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may have the potential impact of tariffs already factored in, which could result in a bounce in prices.	1)	China listed tariffs on beef of 10% that will take effect on March 10 as retaliation to the additional tariffs put on Chinese imports Tuesday..
2)	Cattle numbers remain tight and rebuilding the beef herd will take some time to accomplish. This should continue to support prices.	2)	The weakness of cash cattle over the past month may be extended this week as packers remain uncertain over demand and will not pay higher.
3)	Hog futures have declined substantially over the past two weeks in anticipation of the tariffs. The market may be overdone to the downside and futures may rebound.	3)	China listed tariffs on pork of 10% to take effect on March 10 in retaliation to the additional tariffs by the U.S. put on Chinese imports today.
4)	Packers should purchase hogs more aggressively Tuesday as they need to buy to maintain the current slaughter pace.	4)	New lows in hog futures on Monday do not indicate support has been found. There needs to be evidence of increasing demand.