The decline in livestock futures and cash continues to be at the forefront during the past several weeks. Weakness has been caused by several conditions. The continued threat of tariffs and the position that the technical conditions of being overbought created the liquidation of livestock in every area. Now that a conclusion to the U.S.-Mexican threat of tariffs has been put on hold indefinitely, some of the weakness should be relieved.
The cattle market has been in a quagmire since the beginning of the month of May. Hedgers have been willing sellers of cattle due to the large basis between cash and futures which was beneficial to those who took advantage of that condition. This swamped the cash trade. Numbers were plentiful for the packer to ease their bids and therefore weakened the market.
At the present time, the market is now oversold. Considering the current events regarding Mexico and the United States, this is likely to change the outlook in the weeks ahead.
The overall outlook still has to be considered. The number of cattle on feed is still extremely large and could restrict how friendly the outlook will be in the next month. Therefore, producers should continue to monitor market conditions and protect inventories if warranted.
Hogs have not lost their volatility in the last several months. With the recent developments, that is not likely to change in the near future. With the agreement between the United States and Mexico, the likelihood of demand for pork may increase — which could be beneficial to prices in the future.
With the problem of African swine fever still continuing in Asia, one would suspect this will keep exports fairly strong to those affected countries. On a short-term basis, the market is oversold. We will likely see the market at least stabilize in the weeks ahead. Looking back over the past several years, the hog market charts look a lot like a roller coaster. Looking ahead, it would not appear there will be a major changein this type of pattern in the weeks and months ahead. Producers should keep in touch with current market conditions — especially the export picture — and protect inventories as needed.