As we move toward the summer months, the livestock markets continue to remain in very unsettled positions. Many factors continue to dominate the future outlook for both the cattle and hog industries. There are the tariffs, the African swine fever which has dominated these markets, as well as the weather which has had its influence on market conditions. This has put the livestock markets in a rather large holding pattern through most of the spring — until a better long-term direction is found. Within these range bound situations over the past few months, the volatility has remained at the forefront as quick big moves in either direction have not disappeared.
The cattle market, which has been the most benign of the livestock trade, has remained in a virtual trading range from the end of October 2016 to a high in April 2017 and has remained in between that high and low to date. This means the supply and demand for beef has remained fairly stable with a few exceptions during this period. This points at the present time that a significant change in the supply and demand outlook will need to change significantly to break out of this long term trend. The latest U.S. Department of Agriculture’s monthly Cattle on Feed report released on May 24 indicated lighter placements than anticipated.
This report is not likely to be enough to violate the upper limits of the long-term trading range, but will assist in supporting the low end of the trading range. Producers should remain aware of market conditions and protect inventories as needed.
The hog market has been in a similar trading range since March 2015 to the present — although the trading range is considerably more volatile than the cattle market. The supply and demand for pork has had more dramatic changes during this period which accounts for the large swings in price during this large trading range. The same dynamics of the news which has affected all the livestock markets has particularly affected the hog market more than the other livestock.
Currently we are near the top end of the large trading range and the market acts a bit tired at this juncture. It would appear we need to have further good news to assist in moving higher in prices in the short term; or this market could slip back in better support areas.
The obvious area to assist in holding the market in the current area and having the potential to move higher would involve the demand for pork increasing from the African swine fever depletion of supplies in the Asian continent. This will continue to keep the hog market in potentially unsettled condition with a potentially volatile condition. This means that producers should stay in contact with current market conditions and protect inventories if needed.