Cattle:

The border is re-opened. Tariffs against Mexico are delayed for one month. The market now questions whether tariffs against Canada will be delayed. This market has weeks of rallying to unwind. How much of the $24 rally for cash will be removed? We were at $185 before the border closure. Friday's annual Cattle report suggested expansion in the US cow/calf sector has not really started in earnest.

Mexican Border Opened: The Mexican ag minister announced the border had finally been opened. It had been closed since 11/22 since the finding of New World Screwworm. The market spent weeks pricing out the 4% of US cattle slaughter that we import from them. Though they are only sending us calves and light feeders this rallied the US fed and feeder markets. Now, we have to price that supply back in.

Tariffs: Over the weekend President Trump announced 25% import tariffs on products from Mexico and Canada and 10% for products from China. Today both Trump and the Mexican president announced a one month stay on their tariffs. Trump had a conversation with the Canadian president at 2 pm Central today. We do not have word on any outcome of that conversation. The White House spokesperson noted he plans to speak with the Chinese president in the next two days. For cattle, this is a moderate focus. In prior days the market began to price out some of the 2% of US supply that Canada sends us via both feeders and fed cattle. The market now questions whether this tariff on Canada will stay in place.

State of the Cattle Cycle: The annual “Cattle” report was released this afternoon. In prior years this was a bi-annual report. As of last year the July issue has been permanently ended. As you know, cow/calf sector expansion pushed beef cow numbers from 29.0 million head on January 1, 2014 up to 31.6 by 2019. There was very light liquidation in beef cow numbers, mainly from falling heifer retention, into 2021, shown by a 30.0 head estimate January 1, 2022. Big beef cow liquidation in 2022, and moderate numbers since, lowered the cow herd to 27.9 on today's report. Though this is only -0.5% from last year it represents a -12% hit to the herd over six years. Heifer Retention on Hold: Heifers held back for the beef cow herd were counted at -1.0% from last year. We are not holding the heifers back yet. The market will take this news, in general, as lightly bullish. We have yet to hit a fall calf price that starts heifer holdback. Even when that does start it will mean another 1 1/2 years of still-falling beef production as those females are kept from the feedlot. Expect the general low for US beef production, and peak for cattle prices, at some point in 2026 or early 2027.

Cash Cattle: Before the border closure Southern cash cattle traded at a great price, $185. Last week it traded at $209. Nebraska traded at $210 live and $330 dressed.

Futures: Futures made a bad move in the prior week. They went from pricing in the belief the cash rally was short term to suggesting it would last. They were holding premiums. Currently they suggest $202 in February and $192 by June. That still appears a bit optimistic at +10% and +5% year/year respectively.

April live cattle are still in an uptrend. That may end soon though. The are two open gaps waiting at lower prices, the 195.52 close from 1/8 and the 189.55 close from 12/24.

March feeder cattle are still in an uptrend. That may be ending though. This market has left open gaps at lower prices. An important point to note is that, so far, it has shown no interest in filling them. We have downside gaps at the 1/21 close of 267.25, the 1/8 close of 264.97 and the 12/24 close of 255.00…Rich Nelson

Hogs: 

Last week's hog market rally was likely due to the market pricing out some of Canada's hog exports to the US. Though at this moment, tariffs against Canada are still on, the market now questions whether that decision will change soon. This market has a gap open at lower prices and with today's trade, one gap open at higher prices. Current prices are now under our $89 view of April economic value. We would like to turn supportive on a move to fill that downside gap from one month ago.

Tariffs: Over the weekend President Trump announced 25% import tariffs on products from Mexico and Canada and 10% for products from China. Today both Trump and the Mexican president announced a one month stay on their tariffs. Trump had a conversation with the Canadian president at 2 pm Central today. We do not have word on any outcome of that conversation. The White House spokesperson noted he plans to speak with the Chinese president in the next two days. We import 5% of our hog slaughter from Canada. With the market now thinking these tariffs are flexible, it is pricing those hogs back in.

Cash Hogs: The seasonal low is in. Over 16 days this market has added a light +3.34. The Lean Hog Index is 83.77. The major winter seasonal low was 80.43 on 1/9.

February Futures: In 13 of the past 20 years cash hog prices were higher in February than December. It is a normal occurrence given the usual light decline in supply after the supply peak for the year in early winter. February is still holding a premium vs. the 83.84 cash settled December price. We are neutral the February.

Allendale View on Futures: Two weeks ago we released the pricing forecast for 2025 in the AgLeaders Conference. That forecast was generally positive to pricing through summer (February was seen at $84, April $89, June $105 and August $104). The second half of the year may see some added pressure with pork production +2% to +4% year/year. Our targets for the fall/winter period, at expiration, are October $82 and December $74.

Wholesale Pork: Pork is still on a seasonal run to higher prices. Over 20 days it is up +5.98.

USDA Pork: The 1/10 monthly supply/demand report also holds meat balance sheets. USDA added 140 million lbs. to their prior view of 2025 pork production. Now at 28.510 billion they are +2.6% from 2024. This is in reaction to the lightly bearish 12/23 Hogs & Pigs report. Allendale is currently at 27.888 billion, +2.1%.

On the chart, April lean hog futures are in a two month sideways trade. The past three weeks attempted a rebound within that sideways trade. Today's gap lower trade removed much of that rebound attempt. Today's left a gap to the 90.35 close from 1/31. It may take some time for that gap to get filled. In the near term bears are eyeing one unfilled intraday gap from the 1/8 close, 85.07...Rich Nelson