U.S. live cattle futures fell Wednesday on growing concerns over the U.S. economy and quiet cash cattle markets.
Cattle for August delivery fell 0.5 cent, or 0.4%, to $1.1205 a pound in trading at the Chicago Mercantile Exchange. The CME October contract fell 0.95 cent, or 0.8%, to $1.171 a pound. August feeder cattle futures fell 1.5 cents, or 1.1%, to $1.335 a pound.
Futures were pressured by a broad sell-off in commodities as investors sold out of riskier assets on concerns that the U.S. economy is stagnating. Some economists have warned that Tuesday's legislation to cut U.S. government spending could hurt the economy in the short term. Meanwhile, orders for U.S. factory goods fell in June for the second time in three months, the Commerce Department said Wednesday.
The Dow Jones Industrial Average, which fell through its 200-day moving average on Tuesday, was recently down 111 points at 11755. Crude fell 2% to $91.90 a barrel.
Traders and cattle brokers are also awaiting this week's deals in the cash markets, which will signal the direction of prices. Producers have generally sold cattle for $1.08 to $1.10 a pound in recent weeks, even as the August futures contract, which expires at month's end, is trading at prices about 2 cents to 4 cents higher than cash prices. Cash prices and futures prices typically converge as a contract nears its expiration.
"The cash cattle market hasn't been fully tested yet," said Troy Vetterkind, president of Vetterkind Cattle Brokerage.
No cash cattle bids have been reported yet but some are expected to develop as the day progresses. Beef processors have adequate supplies of cattle for most if not all of this week's slaughter operations, so they will not likely purchase more animals in the spot markets until Thursday or Friday, analysts said.
Cattle feeders in the Texas Panhandle are asking $1.12 to $1.13 a pound for the animals this week. Sales there last week were from $1.08 to mostly $1.085 a pound.
The U.S. Department of Agriculture reported choice boxed beef prices Tuesday up 15 cents at $173.77 a hundred pounds and select off 85 cents at $169.27 a hundred pounds.
Domestic demand for beef is expected to improve as temperatures in the heavily populated north eastern region of the country are forecast to moderate, compared with the hot July weather.
The latest HedgersEdge packer margin index was plus $46.50 a head, compared with $48.50 the previous day.
Wednesday's cattle slaughter is projected to be about 129,000 head.