All of the fundamental dominos in favor of cattle markets for so long are lining up in the other direction. Along with increasing supplies, last week’s sharply higher grain prices took a toll on Cattle futures and cash prices. On Monday, it was the weekend news that China is imposing additional tariffs on a list of U.S. imports, including pork (see below).
Although Cattle futures tried for support early, they couldn’t withstand the pressure of tumbling Lean Hog futures and related technical selling.
Live Cattle futures closed an average of $1.28 lower through the front three contracts (87¢ to $1.62 lower) and then an average of 30¢ lower.
Except for 22¢ lower in newly minted away Mar, Feeder Cattle futures closed an average of $1.22 lower (65¢ to $1.65 lower).
Choice boxed beef cutout value was $1.24 lower Monday afternoon at $219.80/cwt. Select was $1.81 higher at $210.50.
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Major U.S. financial indices closed sharply lower on Monday, led by tech stocks—fears over increased regulation—and concerns about trade wars, with China’s weekend tariff retaliation.
The Dow Jones Industrial Average closed 458 points lower. The S&P 500 closed 58 points lower. The NASDAQ closed 193 points lower.
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China is imposing an additional 25% tariff on U.S. pork imports.
That’s on top of duties that were already in place of 20% and 12% for chilled pork and frozen pork, respectively, according to Import Duties by Country, compiled by the U.S. Meat Export Federation (USMEF).
“China was the third largest value market, with more than $1 billion in U.S. pork being shipped there last year,” says Neil Dierks, CEO of the National Pork Producers Council. “Exports are extremely critical to the financial well-being of our producers. Over the past 10 years, the United States, on average, has been the top exporter of pork in the world, and we’re the lowest-cost producer. In any given year, we export pork to more than 100 nations, and those exports support 110,000 American jobs. Last year, nearly $6.5 billion of U.S. pork was exported, which was more than 26% of U.S. pork production.”
For context, Glynn Tonsor, agricultural economist at Kansas State University explains, “The Chinese market for U.S. red meat indeed remains highly valued both today and for the foreseeable future. However, the U.S. export portfolio is more diverse than in the past, and hence likely less impacted by any changes in trade with any single country.” He adds that total U.S. pork exports last year exceeded 5.6 billion lbs., up from 109 million lbs. in 1987.
Tonsor provides an insightful factsheet that summarizes the relative concentration of export destinations for U.S. beef and pork.
In it, he explains, “The Herfindahl-Hirschman Index (HHI) is an often-used measure of market concentration where lower values reflect less concentration and a value of 1 reflects reliance on one sole country.”
By that measure, market concentration is relatively low for both U.S. beef and pork exports. The HHI for pork last year was around 0.20; about 0.18 for beef.