Talk that Japan, our traditional number one beef customer, will soon raise the age limit (from 20 to 30 months) for U.S. cattle from which product may be imported sparked strong gains in live cattle futures Tuesday morning. That shift might make the bulk of beef from American animals eligible for the Japanese market, so this might give the cattle market a big boost if/when obstacles to this move are cleared. Bullish CME traders may also have been reacting to the Tuesday bounce in wholesale values, especially when those are compared to the losses posted last week. In addition, nearby futures were technically oversold late last week. February cattle had surged 0.77 cents to 125.72 cents/pound at the Tuesday afternoon close, while April climbed 0.67 cents to 130.37.
Just as CME lean hog futures finished last week in a mixed fashion, they behaved similarly Tuesday morning. Trader uncertainty about short-term prospects for the cash and wholesale markets is probably playing a big role in this confusion, but the manner in which the hog and pork complex might behave if the recent breakdown in cattle and beef prices persists almost surely perplexed the industry as well. Early Chicago action did not seem particularly promising either, since lean hog futures were trading in a mixed fashion despite the strong bounce posted by live cattle futures. Futures later rose moderately in probable response to firming cash quotes. The afternoon pork report also seemed supportive of the short-term outlook. However, the large pork inventory indicated by the afternoon USDA Cold Storage report may handicap bullish efforts Wednesday morning. February hogs settled 0.35 cents higher at 85.70 cents/pound Tuesday afternoon, while June futures climbed 0.02 cents to 97.27.