GENERAL COMMENTS:
Spooked stock market traders triggered a widespread risk-off selling spree during Wednesday's trading session, and even in the livestock futures markets, all the bullish fundamentals in the world couldn't counteract the volume of sell orders. Because the reason for the stock sell-off was pretty esoteric and subjective, it's unlikely to have a lasting effect on livestock traders' real outlooks. For instance, the actual market for cash cattle is still expected to be strong later this week when short-bought packers finally establish some bids. Last week was marked at mostly $179 in the South and $294 in the North. The National Direct Afternoon Hog Report showed purchased swine prices down $2.13 to a weighted average of $101.87 on 4,647 head. Prices ranged from $93 to $106, and the 5-day rolling average is now $103.08. September corn moved down 8 3/4 cents to $4.88 1/4 per bushel and August soybean meal closed down $4.30 per ton to $451.80. The Dow Jones Industrial Average was down 347.79 points and the NASDAQ was down 347.27 points.
LIVE CATTLE:
A one-day sell-off in the stock market doesn't necessarily mean that the actual economy is poor or that grocery shoppers will stop paying for beef but, nevertheless, spillover selling in the commodity futures sector meant live cattle contracts fell, too. The August contract closed down $1.475 at $178.025; the October contract closed down $1.325 at $180.50, and the December contract closed down $1.025 at $184.60. The ostensible reason for the stock sell-off was the Fitch credit ratings agency surprisingly changing the U.S. government's debt rating from AAA to AA+ because of an "erosion of governance" during Congress' debt-ceiling standoff in June. Traders took a day to process that surprise, but will ultimately go back to making up their own minds about politics and asset prices and everything else. Meanwhile, cattle feedlots and packers are going to be called to make up their minds about how much business they want to do and at what prices when cash cattle trade over the next day or two.
Boxed beef prices were lower: choice down $2.92 ($303.18) and select down $2.13 ($277.47), with a movement of 134 loads (73.04 loads of choice, 30.91 loads of select, 0 loads of trim and 30.48 loads of ground beef).
THURSDAY'S CASH CATTLE CALL: $1.00 to $2.00 higher. Given that packers are short bought, prices will likely turn higher this week when cattle trade.
FEEDER CATTLE:
There have been two straight days of relatively high trading volume in feeder cattle futures, but with opposite directions -- higher Tuesday, lower Wednesday -- which results in net sideways price movement. At the end of the Wednesday session, the August feeder cattle contract was down $1.65 at $246.825, the September contract was down $1.80 at $250.10, and the October contract was down $1.55 at $251.85. A dome of excessive heat is parked over the southern United States, and although it's not directly over the Texas panhandle, it's still affecting a large number of cattle through the rest of Texas, Oklahoma, and southern Kansas. This will notably exacerbate some pockets of long-term exceptional drought in cattle country. The CME Feeder Cattle Index from July 31 is $244.69.
LEAN HOGS:
On Wednesday, lean hog futures were unable to build more of the higher trend that their charts have been developing over the past two months. The August lean hog contract closed down $1.00 at $102.675; the October contract closed down $0.775 at $84.875; and the December contract closed down $0.375 at $76.875. Seasonal low slaughter weights mean packers must keep processing a large number of hogs to refill their cold storage or to take advantage of the recovered pork cut-out values. Therefore, unless the stock market volatility from Wednesday later evolves into something more drastic for the economy, the lean hog futures losses from the day may end up as just a blip on the chart. The afternoon pork cutout showed the overall carcass value down $3.63 to $111.63. There were 278.69 total loads (234.44 loads of cuts and 44.25 loads of trim). The CME Lean Hog Index for July 31: down $0.10, $105.90, and the projected Index for Aug. 1: down $0.10, $105.80.
THURSDAY'S CASH HOG CALL: Steady to $1 higher. Resilient pork cutout values mean that packers can approach a tight summer hog market with strength.
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