GENERAL COMMENTS:
Uniform losses are seen in cattle futures Thursday morning with live cattle and feeder cattle futures trading 50 to 90 cents per cwt lower in most contacts months. Very limited trade is seen in the complex as prices are backing away from Wednesday's gains in all contract months. This has become a too familiar pattern in the livestock market during August with cattle contracts unable to string together two consecutive days of gains since early August. If the back-and-forth moves continue, price direction will continue to be very limited. December corn is down 13 1/2 cent per bushel and December soybean meal is down $7.30 per ton. The Dow Jones Industrial Average is down 51 points.
LIVE CATTLE
Active pressure in live cattle futures developed early Thursday morning, but as more volume stepped into the lightly traded market, prices pulled back from initial losses. Although live cattle futures remain firmly lower, October contracts are holding 62-cent losses, trading at $128.42 per cwt. The inability for cattle futures to string together any market consistency remains a challenge. October live cattle contracts have not traded in the same direction for two consecutive days since Aug. 3. This created a systematic back-and-forth pattern that has lasted well over two weeks, and is creating uncertainty about bringing additional trade activity back into the market until the complex is able to break out of this price pattern. The aggressive morning losses in grain trade continues to be a major obstacle to the cattle market, creating concerns that fund money may exit the commodity markets in the near future, potentially liquidating cattle contracts. Cash cattle trade continues to slowly trickle in through the morning, with reports of light trade developing in the South at $122 per cwt. This is $1 higher than last week's weighted average. Additional sales have not been reported in the North following light trade Wednesday, but the underlying higher market tone is creating expectations that firm price moves will continue to be seen through the end of the week. Asking prices are holding at $123 to $124 per cwt live basis in the South and $202 and higher in the North dressed basis. Some additional interest may be seen through the rest of the day, but with the cattle on feed report Friday afternoon, it is very possible that a portion of trade will be delayed until after the report release. The weekly beef export report reported sales of 11,100 metric tons, with shipments of 19,700 metric tons. These totals slipped 18% from week-ago levels and are down 42% from the four-week average. Sluggish activity in export sales and shipments is likely partially due to the recent surge in boxed beef values and limited interest in all normal trading partners.
Thursday's morning's boxed beef prices are higher once again with choice cuts up $0.98 at $340.06 and selects up $5.22 at $315.02 on a total count of 43 loads. The moderate gains in choice cuts indicate that markets are starting to settle down, but select cuts continue to move aggressively higher. This will help to narrow the wide gap between the choice/select price spread, which was disproportionally large, over $30 per cwt in Wednesday afternoon's report. The ability to hold this support through the end of the day will be important to how futures markets react to beef values over the next couple of days. Dow Jones estimated Wednesday's cattle slaughter at 120,000, 1,000 lower than a week ago.
FEEDER CATTLE
Narrow to moderate losses are seen in feeder cattle futures Thursday morning. This is a significant shift from morning lows, which posted triple-digit losses in nearby contract months. Sharp losses in grain prices are creating some opportunities to lock in lower feed costs, but this is not seen as totally positive to the feeder cattle market as traders remain concerned that more widespread shifts in commodity investments will develop from the noncommercial segment of the market. Like the live cattle complex, feeder cattle futures have established a pattern of moving trading the opposite direction from the previous day. September feeder cattle contracts have not strung together two consecutive positive price moves since early August. This could become a problem if this pattern continues over the next couple of weeks. The CME Feeder Cattle Index was priced at $155.24 for Aug. 17.
LEAN HOGS
October lean hog futures quickly turned lower with triple digit losses seen in all nearby contracts, but the most aggressive pressure continues to hold in front month October contracts. Spot contacts are $2.25 lower, trading at $86.87 per cwt midmorning. Aggressive outside market pressure seen in grain and cattle trade, combined with further pressure in financial markets added to the early morning weakness in lean hog trade. The move lower in nearby contracts does little to change any technical of fundamental market direction, given the wide market shifts and yo-yo price swings seen over the last several weeks. Pork export sales for the week totaled 20,000 metric tons. Mexico and Japan led the leader board for the week with Mexico reporting 6,900 metric tons purchased, while Japan bought 3,100 metric tons. China sales for the week were generally disappointing with a total of 600 metric tons purchased. Export shipments totaled 28,700 metric tons with China accounting for 4,500 of this total, but well behind shipments to Mexico of 13,500 metric tons (nearly half of the entire weekly shipment amounts went to Mexico). Pork primal prices have surged higher once again, driven by aggressive gains in ham and belly cuts. Butt cuts posted aggressive double-digit losses, but this was not enough to offset the bullish market shift higher in ham prices. Ham values increased $23.42 per cwt in the morning report. Cutouts are up $7.55 at $128.16 Thursday morning on 84.6 loads. Negotiated hog prices are $0.86 per cwt higher with a weighted average price of $97.99 per cwt on 6,025 head on the National Direct Morning Hog Report. The swine/pork market formula price is listed at $106.64 per cwt. Dow Jones estimated Thursday's hog slaughter at 476,000, 1,000 above a week ago, while 1,000 less than year ago levels. The CME Lean Hog Index is estimated at $108.18 for Aug. 18.
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