Wednesday Morning Livestock Market Update - Traders Focus On Current Demand Rather Than Tariffs

GENERAL COMMENTS:

Cattle futures experienced strong gains on Tuesday with contracts reaching back near their highs. Traders seemed more focused on cattle supplies and good demand rather than tariffs. It will take some time to see the impact on international demand. Domestic demand remains strong as boxed beef prices continue to increase. Prices jumped $6.96 for choice and $2.06 for select. Strong consumer demand may keep feedlots holding for higher cash as initial offers are $2.00 higher than last week. However, it is uncertain how aggressive packers need to be, as they had purchased some cattle ahead. Feedlots have been holding cattle the past few weeks as cash has been strong, but now they may be more aggressive in moving those cattle rather than holding out another week. Feeder cattle led the charge on Tuesday as demand for feeder cattle in the country remains strong.

Hog futures found buying interest Tuesday after the decline on Monday with all contracts posting triple-digit gains. Traders were aggressive buyers, anticipating the possibility of limited impact from tariffs. Demand might improve as consumers may reduce beef consumption due to high prices, and include more pork in their diets. Support did not come from cash or cutouts as they continued to struggle. The National Daily Direct Afternoon Hog report showed cash down $0.23. Pork cutouts fell $1.94. The variability of cutouts may not be due to demand, but rather the plentiful supply of pork, as slaughter remains strong with higher hog weights. The strong slaughter pace may be a better indicator of demand rather than just focusing on cutout prices.

	BULL SIDE		BEAR SIDE
1)	The strong rebound in cattle futures may signal that the price retracement has been completed and the uptrend may continue.	1)	Packers may not bid aggressively for cattle this week, as it seems they have already purchased cattle ahead.
2)	Boxed beef prices continue to move to new highs as consumers prefer beef in their diets despite the higher prices.	2)	Feedlots may be willing to sell cattle at steady cash and move those cattle they have been holding that are at higher weights. They may not want to take a chance on cash prices next week.
3)	Hog futures moved back into the trading range as traders remain interested in buying on price weakness.	3)	Hog futures did not find support from cash or cutouts, which may limit the upside price potential.
4)	Hog futures still have chart gaps that may be filled at some point. Gaps generally are filled during the life of the contract.	4)	Traders remain uncertain over the impact tariffs might have on international demand for pork. Reduced international demand would increase domestic supplies.