GENERAL COMMENTS:
On Thursday morning, live cattle and feeder cattle futures contracts are building back some of the value lost during Wednesday's sell-off, but the lean hog futures have continued lower after pork cutout values dipped this week. The cash cattle business saw some very light scattered deals in the North Wednesday, reported at $183-$186 live basis and $294 dressed basis, but for the most part, bids and asking prices are yet to be established. Outside markets are mixed, with the S&P 500 still declining, but higher soy complex values show the widespread sell-off may be over and commodities can go back to trading their own fundamentals. September corn is down 6 1/4 cents per bushel and August soybean meal is up $3.70 per ton. The Dow Jones Industrial Average is down 27 points.
LIVE CATTLE:
Live cattle futures are lightly higher Thursday morning and maintaining a net sideways track on their charts. August live cattle are down $0.10 at $177.925, October live cattle are up $0.15 at $180.65 and December live cattle are up $0.275 at $184.875. Beef export sales slumped in the weekly export sales report, with 12,400 metric tons of net sales, which was down 42 percent from the previous week and down 28% from the prior four-week average. South Korea was the main buyer and main destination of export shipments. Nevertheless, packers are making the beef business work, with choice boxed beef prices staying resilient above $300 per cwt. They will come to the cash cattle market either later on Thursday or Friday, and when they do, futures traders can't expect to see the underlying market values fall in the current supply-and-demand scenario.
Thursday's slaughter is estimated at 124,000 head, which is 1,000 fewer than a week ago but in line with a year ago at this time.
Boxed beef prices were mixed Thursday morning: choice down $0.74 ($302.44) and select up $1.00 ($278.47), with a movement of 61 loads (30.09 loads of choice, 9.75 loads of select, 10.67 loads of trim and 10.56 loads of ground beef).
FEEDER CATTLE:
Feeder cattle contracts are leading the sector's gains at midday Thursday, confirming that the calves out on pasture today are headed toward a strong market that's offering over $250 per cwt. The August feeder cattle contract is up $0.475 to $247.30, September feeders are up $0.95 at $251.05 and October feeders are up $1.025 at $252.875. This week's updated version of the U.S. Drought Monitor was released Thursday morning, confirming how some recent rains have brought relief to the Upper Midwest and central Plains, notably with portions of central Nebraska improving from "severe" drought to "moderate" drought. It's rather late in the season for this to make a big difference to hay supplies, or corn yields, for that matter. Other than that, it's generally the same grim picture across cattle country. More improvement may be noted in next week's map, but in the meantime, above-normal temperatures across most of the country are a challenge to feedlot operators.
LEAN HOGS:
A disappointing export sales report on Thursday added to the pressure on lean hog futures, which now seem to be abandoning their upward trend from the past two months. August lean hogs are down $1.10 to $101.575, October lean hogs are down $2.975 at $81.90, and December lean hogs are down $2.725 at $74.15. For pork, net weekly export sales were only 17,800 metric tons, down 30% from the previous week and down 25% from the prior four-week average. The market continues to depend on make-or-break ham demand from Mexico, and although packers may not be feeling overburdened with supply after clearing out cold storage amid the Prop 12 chaos, there is price sensitivity from these customers. Especially with the U.S. dollar climbing this week, there may only be so much the market bulls can squeeze out of the pork and lean hog markets anymore. Thursday's slaughter is projected at 473,000 head, which is 3,000 more than a week ago and 5,000 more than a year ago at this time.
The projected CME Lean Hog Index for Aug. 1 is down $0.10 at $105.80 and the actual index for July 31 was down $0.10 at $105.90. In Thursday's Daily Direct Morning Hog Report, only 215 were reported to be negotiated, so only the five-day rolling average was given, at $103.42. Pork cutouts total 131.38 loads with 112.04 loads of pork cuts and 19.34 loads of trim. Pork cutout values: up $5.11 to $116.74.
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