North American roundup 14 April

CATTLE prices in the USA enjoyed a rally over the past week on the back of lower corn (maize) prices which boosted livestock values. But traders fear that the price rise is likely to be only temporary.

The May feeder cattle contract closed higher on Monday, 13 April at 77.175 ¢/lb (46.3p/lb) against 76.525¢/lb a week ago, fuelled by expectations that forthcoming statistics will show 2-3% fewer cattle in the nations feedlots than a year ago.

Indications that the backlog of fat cattle waiting for slaughter is now starting to clear caused feeder cattle prices to rise by 2-3¢/lb at cattle auctions around the country.

Some traders advise caution, however. They warn that the number of cattle in the feedlots remains likely to be 25% above the five-year average until July at the earliest.

As a result, farmers are expected to face a loss on fat cattle sold to the packing houses throughout the second quarter of this year. This is confirmed by Chicago futures figures which show better prices over the last few days is an upward blip in an overall downtrend.

FORECASTS of dry weather proved great for planting prospects, but bad news for prices. Expectations that good weather in the Eastern corn (maize) belt will enable farmers to press ahead with drilling unhindered by rain raised fears of oversupply and drove down the market.

Contracts for May futures closed at 245¢/bushel (147p/bushel) yesterday (Monday. 13 April), 20¢ lower than two weeks ago.

Average temperatures but normal-to-above-average precipitation is expected in the Western corn belt. In an already weak market, any signs of drier weather is likely to cause prices to tumble.

Disappointing weekly export shipments totalling 420,000 tonnes did nothing to boost traders hopes either. And the market was further depressed by a 6.6 million-tonne increase in the USDA estimate of last years carryover stocks, to almost 31m tonnes.

PIG prices rallied strongly across the USA during the past week. But many Chicago brokers remain bearish, saying that an oversupply of pigs is likely to reduce returns in the medium term.

Lean pig contracts for June were back up at March levels at 61.175¢/lb (36.72p/lb) yesterday (Monday, 13 April) compared with 50.2¢ on Friday, 3 April.

Analysts believe packers are enjoying better margins between the price for live pigs and carcass values. Prices for near months are being further supported by stronger demand.

Rumours of possible orders from South Korea and Taiwan – two major export destinations for US producers – also boosted returns. But analysts say that high stock levels in cold storage are likely to drive prices lower over the coming months.

THE US soyabean market remains depressed by chronic oversupply and competition from other grain crops.

Soyabeans ended the week down again, with the May contract closing at 627¢/bushel (376p/bushel) yesterday (Monday, 13 April), compared with 637.25¢/bushel a week ago.

Brazil is enjoying a bumper harvest thanks to El Niño. Port congestion has eased and export shipments from Santos now face only a seven-day delay.

This could prove good news for the USA as it now looks like the Brazilian crop will be sold before the North American harvest gets under way. Last year, Brazil finished exporting its crop in July. But US analysts had feared that this seasons Brazilian exports could drag on till October or November.

Experts believe that the USDA export forecasts for the year is too high at 25.7 million tonnes. They argue that 25m tonnes is a more realistic number.

US carryover stocks for 1998 are projected at over 12.5m tonnes – the highest since 1985. The latest weekly US export figures were disappointing at 230,000 tonnes.

A brighter spot in the market was soyabean oil, which rallied last week on news that last years ending oil stocks were actually 25% lower than originally expected. The May contract rose 140 cents on the week to close at 278.8¢.

THE market for US wheat remains extremely bearish, burdened by a global overhang of old-crop supplies and the prospect of an excellent North American harvest.

Most Chicago brokers are looking for a further price slide, despite a drop in wheat returns to new lows this week.

Contracts for May wheat lost 13¢ over the week to close at 298¢/bushel (179p/bushel) on Thursday, 9 April. Values were driven lower by a1.4 million tonne increase in the USDA estimate of last years global end-of-season stocks to 19.8m tonnes.

On the brighter side, weekly export sales of 300,000 tonnes were towards the high end of traders expectations and up 47% on the previous week.

But some analysts warn that this is insufficient to turn the market around. And with consumption unlikely to increase, only a serious disruption to supply will raise US wheat prices.