July 19, 2011

 

US hog, cattle futures drop as debt talks persist

 

 

US hog futures closed weaker on Monday (Jul 18), but well above the day's lows, pressured by the continuing debt talks in Washington that raised worries.

 

Cattle futures likewise finished lower, pressured by the debt talks and a heat wave gripping much of the country. Hot weather can discourage cookouts, which can hurt beef sales.

 

Hogs finished lower despite ongoing talk of pork export sales to China and Russia, with some of the China pork to be shipped next week.

 

"I think with the looming debt crisis the trade is concerned domestic demand will not pick up," said Don Roose, analyst at US Commodities Inc.

 

That perception hit other markets too. Crude oil was down 1.35% and equities down 1%.

 

Congress and the President have until August 2 to approve a plan to avert a US debt default and as of Monday there was no breakthrough on an agreement.

 

The debt talks overshadowed ongoing talk of new pork sales to China and Russia. China needs pork to curb food inflation.

 

China announced plans to release pork from its reserves to cope with rising pork prices, but industry sources said the quantity will not be enough to arrest prices.

 

The average US wholesale pork price jumped to US$100.07 per cwt on Friday, the second highest on record, and analysts said exports were the driver. The record cut-out is US$100.74 set June 27.

 

Weather forecasts call for 90-plus temperatures this week across the eastern two-thirds of the country. Such weather can slow hog marketings, which also should help drive up prices.

 

In pit trading, CME August hogs 2LHQ1 closed down US$0.005 at US$0.9845 and October 2LHV1 down US$0.0135 at US$0.9030.

 

Cattle futures also were lower pressured by ideas the debt talks and the heat wave will slow domestic beef sales.

 

The market fell to a two-week low last week and appears headed even lower this week.

 

"We know meat consumption goes down because grilling goes down," said Roose.

 

As in pork, exports remain a bright spot for beef.

 

After pit trading closed, USDA reported 1,285 loads of beef were sold for export last week, that is the largest export load total this year. A load is 40,000 lbs and the 1,285 is equivalent to about 23,315 tonnes.

 

A weak dollar and improving overseas economies helped beef exports, said Roose.

 

August cattle futures 2LCQ1 closed down US$0.0750 at US$1.0985 per lb and October 2LCV1 down US$0.01 at US$1.1585.

 

Feeder cattle were hit hard again, with ranchers rushing to sell cattle because the heat and drought have damaged pastures.

 

Receipts at the closely watched Oklahoma City auction on Monday were about 13,000 head, compared with 7,243 a year ago, USDA said. Prices for feeder steers and heifers were down about US$3-$5 per cwt versus a week ago.

 

August feeder cattle 2FCQ1 closed down US$0.1125 at US$1.34575 per lb and September 2FCU1 down US$0.01175 at US$1.35625.