Tuesday Morning Livestock Market Update - Cattle Futures May Show Further Weakness

GENERAL COMMENTS:

Traders were positive at the open, as the lower placement number on the Cattle on Feed report provided early strength. However, that was short-lived as uncertainty gained the upper hand and the market fell back after the first 10 minutes of trade and never looked back. The announcement by President Trump over the weekend was to import 300,000 metric tons of beef over the next 90 days, with a promise to reduce ground beef prices by 25%. There was no indication as to where the beef would come from or how logistically this could be accomplished in that short of time frame. It feels more like a gesture to create uncertainty rather than reality. The U.S. border was reopened for Mexican cattle at the Douglas, Arizona, port. It is uncertain how many cattle will cross during the next few weeks or months and what impact that will have on the current market. Other ports will reopen over time. Traders found it difficult to find any bullish support during the day. Choice boxed beef was unchanged from Friday at $385.69, with select increasing $3.70 to $365.02.

Hog futures had an uneventful day with limited price swings. Whether most of the focus was on the cattle or grain markets is uncertain, but the day's end showed little price change. Cash and cutouts were mixed. The National Daily Direct Afternoon Hog report showed cash falling $4.87, with the weighted average now below $90 at $89.40. However, very few hogs traded, making it surprising it was even reported. Pork cutout values increased $1.97. The slaughter pace remains strong and above a year ago, but packers have plentiful supplies available.

	BULL SIDE		BEAR SIDE
1)	Cattle futures may be overdone to the downside with short-covering potentially taking place.	1)	The current negativity in the cattle market and further weakness in futures may trigger further liquidation.
2)	The reality is that cattle supplies remain tight and the herd will not be rebuilt anytime soon.	2)	Consumers could reduce beef consumption if they are concerned about the safety of large quantities of imported beef coming in over a short duration of time.
3)	Hog futures are oversold and may retrace if the current level of support holds.	3)	Hog supplies show no sign of tightening, with packers having a plentiful supply available to them.
4)	Packers were not able to purchase many hogs at lower prices. They may step up aggressively Tuesday.	4)	Continued weakness in cash hogs does not bode well for the market moving forward.