Livestock Markets React to Supply Constraints and Market Shocks
February 28, 2025
By John Simpson
Cattle Futures Hold Strong as Supply Tightens, While Hogs Face a Sharp Selloff
Market Overview
The livestock market is navigating a volatile landscape as cattle prices continue to rise on record cash sales, while hog futures experience a limit-down selloff following President Trump’s announcement that tariffs on Mexico and Canada will not be postponed. This combination of supply constraints in cattle and export concerns in hogs is shaping short-term price action.
Cattle Futures: Uptrend Remains Intact
The cattle market remains in a strong bullish trend as tight supplies, robust consumer demand, and record cash cattle prices continue to support higher futures prices. Recent USDA data confirms that the U.S. cattle herd is at its smallest level since 1951, creating a structural supply shortage that is keeping prices elevated.
- Live cattle futures (LEJ25) found double support at 193.00 following a sharp selloff driven by bird flu concerns. Prices have since rebounded above 196.30, with a near-term target of 200.00.
- Feeder cattle futures (GFJ25) remain strong, with long positions initiated at 268.00 on 2/24, targeting 280.00 as the next resistance level.
- Short-term trend in feeder cattle remains positive, supported by tight supplies and strong demand.
📈 Trend Analysis: Both technical analysis and market fundamentals indicate that the trend for live cattle prices has turned upward and continues to strengthen.
Hog Market: Tariff Concerns Drive a Limit-Down Move
Unlike the cattle market, lean hog futures (HEJ25) saw a sharp decline, hitting the daily permissible trading limit down of $4.00 per hundredweight. This move was triggered by President Trump’s confirmation that 25% tariffs on imports from Mexico and Canada will take effect on March 4, 2025.
- Mexico accounts for over 25% of total U.S. pork exports, and the tariff decision is expected to reduce U.S. pork shipments, increase domestic supply, and push prices lower.
- Technical Analysis: The next downside targets for lean hogs are 83.00, followed by 81.00 if selling pressure persists.
- The Stochastic Oscillator is signaling oversold conditions, but fundamental pressure from the tariff decision could keep prices under pressure in the near term.
📉 Trend Analysis: The lean hog market remains bearish, with further downside potential unless export concerns ease or demand improves.
COT Report & Market Positioning
The latest CFTC Commitments of Traders (COT) report shows:
- Commercial traders remain net short in live cattle, while funds have maintained long positions, reinforcing the bullish trend.
- Speculative interest in lean hogs remains weak, signaling limited buying pressure in the near term.
Key Market Drivers & Outlook
- Cattle market remains strong: Record cash prices, supply shortages, and strong beef demand continue to support prices.
- Short-term trend in feeder cattle remains positive: Ongoing supply constraints keep the uptrend intact.
- Hog futures under pressure: Tariff concerns and reduced export demand could lead to further downside.
- Technical Indicators: While cattle markets remain overbought, bullish momentum is intact; hogs are oversold but face fundamental challenges.
Final Thoughts
In my opinion, the cattle market remains the strongest segment in livestock, supported by fundamental supply constraints and bullish price action. While the short-term trend in feeder cattle remains positive, traders should remain aware of potential resistance levels.
Conversely, lean hogs are facing bearish pressure, with tariff concerns driving the latest selloff. Until there’s more clarity on export demand, hog futures are likely to remain under pressure, with the next downside target at 83.00 and further support at 81.00.
As always, this is just my opinion and should not be considered as financial advice. Market conditions can change rapidly, and it’s essential to stay informed and manage risk accordingly.
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John S. Simpson Jr.
Senior Market Strategist
Walsh Trading
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