Livestock –
The NAFTA talk yesterday sure did a number on livestock markets. I’m not sure if anyone even paid attention to the FCE or other cash talk because the action was all driven by fears of NAFTA termination.
In cattle, this of course was a bullish feature due to the number of feeder imports we receive out of Mexico each year. Now admittedly, just because NAFTA might be scrapped doesn’t necessarily mean these imports will halt, but that is the fear at the moment. As you can see from the chart below, YTD feeder cattle imports are running ahead of the past few years. Any sort of disruption in this action would certainly create some havoc.
Of course the reverse action was seen in hog futures, as Mexico is the destination for US pork exports. Consider the following data:
So, any sort of retaliation by Mexican officials could also pressure US export demand. Mexico is also a decent sized importer of US chicken products, and this backing up in the domestic market will not bode well for wholesale/retail prices.
Keep in mind, however, Trump has backed off these claims for now. Even if Trump were to sign such an EO, he’d still have six months to change his mind through negotiations. It isn’t an automatic change. Still, we know the market will not take its time in assessing the situation for the worst.
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