In a notable market reversal, cattle futures on the Chicago Mercantile Exchange (CME) closed higher on Monday, demonstrating resilience after initial concerns over the United States' decision to reduce tariffs on beef imports. Traders appeared to have fully priced in the news of the tariff rollback announced by the Trump administration late last week, shifting their focus back to fundamental market indicators.
Market Recovers from Initial Tariff Shock
According to Rich Nelson, chief strategist for Allendale, the announcement of tariff cuts had exerted downward pressure on cattle futures during the previous Thursday and Friday sessions. The logic behind this initial dip is straightforward: lower import duties can signal an impending increase in the supply of foreign beef entering the American market, which typically pressures domestic prices.
"By Monday, though, the news had been factored into the markets," Nelson stated, indicating that the short-term negative impact had been absorbed. This recalibration led to a firm closing for key contracts. The CME February live cattle futures settled higher by 2.250 cents, reaching 221.775 cents per pound. Meanwhile, January feeder cattle futures saw a more substantial gain, ending up by 5.725 cents at 326.275 cents per pound.
Understanding the Trump Administration's Tariff Decision
The market movement follows significant trade policy updates from Washington. On Thursday, November 14, the Trump administration unveiled framework trade agreements with several nations, including Argentina, Ecuador, Guatemala, and El Salvador. These deals, once finalized, are designed to eliminate tariffs on specific food items and other imports.
The policy shift accelerated on Friday when President Donald Trump officially rolled back tariffs on more than 200 food products, with beef being a prominent item. This decision was reportedly influenced by growing concerns among American consumers about rising grocery costs. The move was welcomed by trade partners like Australia, which has become an increasingly important source of beef for U.S. food companies, especially for hamburger production, as the domestic U.S. cattle herd has shrunk to its smallest size in decades.
Eyes on Upcoming USDA Report and Hog Market
Market participants are now keenly awaiting the next major data release. Traders are anticipating the U.S. Department of Agriculture's (USDA) monthly Cattle on Feed report, scheduled for release on November 21. This report is critical for gauging future supply levels.
Rich Nelson from Allendale projected that the upcoming report would likely show the seventh consecutive month of lower placements into feedlots, a trend that could provide underlying support for prices. The significance of this report is heightened because the USDA did not release its regular data in October due to the federal government shutdown, creating a pent-up demand for accurate market information.
In related markets, CME hog futures also ended the day in positive territory. The February hog futures contract settled up by 0.05 cent at 79.425 cents per pound.
