Live cattle futures tried to move higher Tuesday, but continued pressure on the equity markets and talk of a recession turned traders cautious about upside price potential. Market will change again Wednesday, and as the week continues, but the caution will remain as each day is filled with political turmoil. The talk of tariffs dominates the news. The USDA reduced the steer price for this year on the WASDE report by $1.00 to an average of $200 from the February estimate. They increased beef production by 120 million pounds to 26.685 billion pounds. Boxed beef prices were mixed on Tuesday with choice up $3.62 and select down $0.09. This indicates overall beef demand remains strong, which may give feedlots greater resolve to hold for higher cash. Feeder cattle futures closed higher across the board, setting new contract highs again. Feeders are in strong demand with tighter supplies.
Hog futures closed lower Tuesday through the August contract with most of the pressure on the nearby April and May contracts. The weak equity markets had an impact on hogs. The continued talk of tariffs leaves the market uncertain over demand. The WASDE report showed estimated pork production down 105 million pounds this year compared to the February estimate. USDA reduced the average hog price by $1.00 from the previous month to $63.00 for this year. According to the National Daily Direct Afternoon Hog report, packers were aggressive with cash up $2.08. Pork cutout values were down $0.64. Lower cutouts should not have much impact as the slaughter pace remains strong as more pork is consumed and packers need to maintain the higher pace.
| BULL SIDE | BEAR SIDE | ||
| 1) | Feeder cattle continue to make new highs with traders trading the trend. This should provide support for live cattle. |
1) | The trade war is heating up and the packers are concerned over the impact on consumers' buying power. High-priced beef may be one item that may be affected. |
| 2) | Cattle slaughter has been improving, which could make packers more aggressive in the cash market as they need cattle. |
2) | The packers may not be willing to pay higher prices for cattle this week, with cash possibly being no better than steady with last week. |
| 3) | Packers may remain aggressive in the cash market Wednesday as they procure hogs to maintain the slaughter pace and meet demand. |
3) | Hog futures may have difficulty moving much higher unless cutouts find consistent support. |
| 4) | More consumers may switch from beef to pork if the economy moves toward a recession. Consumers will be looking at ways to reduce food costs and pork may benefit. |
4) | As long as the equity markets are in turmoil, hog prices may have limited upside potential. The tariffs continue to provide market uncertainty. |
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