2/4/2025 Market Commentary

Live Cattle: The cattle complex has come under pressure to start February. Friday’s Cattle Inventory report lost most of its luster with talks about tariffs and reopening the Mexican border for feeder cattle taking the headlines throughout the weekend. The Cattle Inventory report was not much to talk about- beef heifers kept for replacements were lower than expected but the 2024 calf crop was larger than expected. The beef herd continues to contract and there are no signs of rebuilding currently. Heading into the weekend with mixed signals as to whether the tariffs with Mexico and Canada were set to be imposed, the cattle market wasn’t sure which way to trade. Saturday, the tariffs were imposed, and the Mexican border was reopened for feeder cattle imports. Later in the day, Mexico and the U.S. came to an agreement to move the tariffs to March 1. The cattle market responded negatively and hasn’t looked back. Overall, tariffs would be friendly to the U.S. cattle and beef markets, but with the Mexican border being opened, more cattle will be traveling into U.S. feedlots to be put on feed. Cash cattle this week appear to be lower with the lower futures. Small trade in the north on Tuesday morning at $325, which would be down $5 on a dressed basis compared to last week. Spec funds were holding a record-long position in Live Cattle as of last Tuesday, and with negative news and uncertainty within the cattle complex, managed money is exiting long positions and driving the futures market lower.

Feeder Cattle: 5 days after posting new contract highs, feeders have had an $11+ sell-off. Corn posted new highs for the move on Tuesday, which is weighing on the market, but the main culprit is the reopening of the Mexican border for feeder cattle imports. Imports from Mexico have been shut off since November 22 after the discovery of screw worm in Mexican cattle. The futures and cash markets found support on the news, as available feeder cattle were decreased by the ban. March Futures added over $28 from the time of the announcement to the contract high last week. With more feeder cattle available to the feedlots, especially in the south, the futures market has corrected lower, and the cash markets have softened this week.

Lean Hogs: Lean hog and pork markets have been the most sensitive to the tariff talks, especially with Mexico. Mexico is our biggest importer of U.S. pork, taking 40% of our total export business. With 25% of our pork production hitting export markets, Mexico is an integral cog in the wheel for U.S. pork and hog prices. April futures finished the day $4.00 lower on Monday, but found support Tuesday, finishing the day $3.40 higher. Fundamentally, the cash markets and cutout continue to be supported. National cash is up over $3 on the week and the cutout is slightly higher. Mexico will continue to be a sensitive subject for traders, and it is important to watch the currency values between Mexico and the U.S. going forward.

Corn: After opening gap lower for the second trading session in a row, futures found support on the delayed tariffs between the U.S. and Mexico and have now posted new highs for the move. Both gaps have been filled and focus will again shift to South American weather and the U.S. planted acres. We could see a massive corn acre number in 2025 with economics favoring corn over soybeans. Our export business has picked back up after a few sluggish weeks surrounding the holidays. The next WASDE report will be released on February 11, and with our current export pace, the USDA may be forced to again adjust export demand higher. We saw a flash sale of 132,000 metric tons to South Korea Tuesday morning. Overall, corn futures have rebounded close to 20 cents from the lows on Monday and traders will keep their eyes on any and all information coming from the White House and Trump administration in the coming weeks.