Market Summary

At the risk of speaking too soon before everything has settled down I thought I’d just make a few comments about the market as it relates to tariffs. As of the end of this week our cattle markets have been basically steady with pre tariff levels.  Cattle futures are under extreme pressure as we speak as well as the stock market and most commodities including oil. I can’t help but think this spills over to the cash market.  I think we can expect lower cash prices going forward.  What are the reasons for this?  I think this is the first time in my life that I’ve seen a market disintegration that is completely the result of government interference, in this case tariffs.  Fundamentals have not changed. So what has changed?   Firstly, the cattle market will fall as the stock market falls. I think there is some hope for stabilization as people realize that the cattle market is on pretty solid footing, but the bullishness is slipping away. Secondly, while Canada, especially the ag sector, has escaped most of the tariff damage, the US is getting hammered by China. This is what is affecting  the futures. China has effectively closed their market to US agricultural products both through retaliatory tariffs but also through non tariff barriers. More than 300 US meat processing plants have not had their licenses renewed by the Chinese government. These were due for renewal on March 17 and they have not been. So as of that date no beef slaughtered in the US has been eligible for export. As well, the Chinese government is reviewing the amount of beef they are willing to import from other countries. Right now it appears that all countries will face import limits or safeguards. So, as usual, while the US administration is mostly talk and no action the Chinese government is mostly action and no talk.  US beef exports to China are EXTREMELY important to cattle pricing and without this market the futures will have to find lower levels.  Hopefully there are negotiations that can work to limit the damage but I guess we’ll see. So, to sum up, the cattle market remains on solid footing and will fare better than almost all other commodities and we are at very high levels.  However, there is likely no upside from here, at least in the near term. So, not a disaster, but just so unfortunate that government interference in the market will affect pricing.  Ian

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