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While the domestic demand outlook for the beef sector has been flat, export business is looking strong, and that has allowed cattle to resume its bullish posture. Supportive psychological factors, namely stronger equity market action and a weaker dollar, have been backed up by some bullish fundamental data. Monthly export data from May gave the market its initial lift yesterday, and August live cattle traded to their highest level since May 13th after breaking out above the recent highs. The USDA reported US exports of beef and veal in May at 203.6 million pounds, up from 177.20 million in April and 160.5 million a year ago. The market was also helped later in the session by reports of surprisingly strong cash cattle sales in Texas and Oklahoma, where they traded at $94, up from $91.50-92 the previous week. This occurred despite a lower trend in cutout values from the previous week. Yesterday the boxed beef cutout was down 14 cents at mid-session and closed 48 cents lower at $153.98. This was also down from $155.62 the prior week and the lowest it has been since June 18th. The estimated cattle slaughter came in at 131,000 head yesterday. This brings the total for the week so far to 392,000 head, up from 373,000 a year ago. A heat wave that is moving into the central part of the US has been a bearish demand concern, but the stronger outside markets and now bullish fundamental data have overcome that factor. With some weather forecasters calling for this pattern to extend well into August, the demand issue could resurface at some point.
TODAY’S GUIDANCE: With yesterday’s rally August live cattle have achieved a key retracement off of the May-June break, and holding these levels could possibly set the market up for a move back to the June highs up around 95.50. A previous resistance level at 92.35 becomes support. Next resistance comes in at 93.30 and 94.275.
