Cattle — Stores rally as US feed price eases

FEEDER (store) cattle prices continued to track feed corn (maize) declining as maize rallied – until yesterday (29 June). Now, a collapse in maize prices on news of milder weather has been echoed by a strong recovery in store cattle.

The Chicago August store cattle futures contract closed on Monday 72.45¢/lb, up 1.50¢from Friday and just off the week-earlier level of 72.95¢/lb. The rebound is welcome news for battered owners, who have seen the value of their cattle drop 8% in the past couple of months. With negative margins for finished cattle to the meatpackers, owners are hoping for a further decline in maize prices to bolster both stores and finished cattle.

Meanwhile, wholesale beef prices have dropped ahead of falling retail demand expected after the Independence Day holiday weekend (4-5 July). The light Choice-grade cut-out has fallen abruptly to 100.5¢/lb from 102.1¢/lb a week ago. Retailers are in a strong bargaining position as beef production is running at over 500 million pounds a week, well above average.

Overproduction hits US pig prices

THE pig market has fallen sharply over the last week, before and after the release of the quarterly Hogs and Pigs report by the USDA on Friday (26 June). Bearish signs of worsening overproduction have driven futures prices lower. The Chicago August lean hogs contract closed on Monday at 56.62¢/lb, down 2.25¢ from 58.87¢/lb a week earlier.

Total pig inventories climbed 6% from year-earlier figures to 61.6 million head on 1 June. Market hog (finished pig) inventories were up 6% year-on-year to 54.6 million head, while the breeding herd rose 1% from June 1997 to 7.0 million head. Meanwhile the Spring pig crop rose a strong 5% from a year ago to 26.7 million head. With the growth in the breeding herd, many pork industry analysts believe that pig production will increase during the rest of this year.

Cash pig prices have also fallen sharply, to 40-41¢/lb, compared with 43-43.5¢/lb a week ago. Packers have dropped their bids as falling wholesale pork prices have pushed their margins into negative territory.

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    US maize market follows weather forecasts

    US corn (maize) prices had a volatile week as the market reacted to weather forecasts. The rally that started mid-June peaked early last week after prices in some futures contracts had climbed as much as 18%. Many traders paid heed to private weather forecasts that show hot and dry weather in July, the La Niña sequel to El Niño. This would cut corn yields and be bullish for prices.

    However, after hitting its highest level since early May, the market then retreated sharply on news of milder weather forecasts from the official National Weather Service. The Chicago July futures contract closed on Monday (29 June) at 238.5¢/bushel, down 12.25¢ from 250.75¢/bushel a week ago.

    Overall, the US maize market is depressed by oversupply and todays corn acreage report was expected to show an increase in corn acres planted to 81.5 million acres, from 80.2 million last year. Meanwhile, corn stocks at 1 June are expected to have risen, compared to last year.

    While domestic output is growing, export sales remain disappointing. The renewed weakness in the Japanese Yen and aggressive corn exports from China are hurting US sales. For the week ended 18 June 18th, the USA 26.3 million bushels. But it needs to export nearly 30 million bushels each week to keep pace with US Department of Agriculture supply and demand estimates .

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    US wheat market awaits spring planting figures

    US wheat prices will remain volatile as the winter harvest gets under way and traders try to second-guess the spring crop. Already 35% of the winter wheat crop has been harvested, well ahead of the seasonal norm of 21% and a rate of completion this time last year of 14%.

    Tomorrow will bring the spring wheat acreage report from the US Department of Agriculture and many analysts are looking for a drop to just over 16 million acres from 19.4 million last year. Anything higher than that would depress the market further.

    The Chicago futures market collapsed to contract lows on Monday (29 June) on signs of better weather, after creeping upwards for most of last week. The July futures contract closed on Monday at 268.5¢/bushel, down 6% or 18¢ from 286.5¢/bushel a week ago.

    As well as weather-related bearishness, wheat is suffering from concerns that the Asian currency crisis will hurt exports. US exporters have already fallen 26 million bushels behind USDA targets for the export year commencing 1 June. In the week ended 18 June, the USA exported only 17.8 million bushels, against a needed weekly average of 22 million bushels.

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    Soya collapses after two-week US rally

    THE soya market collapsed yesterday (29 June) after rallying strongly over the past couple of weeks. The Chicago July futures contract lost 5% in a single day to close at 618.75¢/bushel, down from around 673¢/bushel at one point last week.

    Weather forecasts are causing these wild swings during the planting season. Some private forecasters are looking for hot, dry weather in July and August, a so-called La Niña effect. However official weather predictions released late last week pointed to milder, more favorable growing conditions.

    Such market volatility is also being blamed on concerns ahead of tomorrows acreage report from the US Department of Agriculture. Many analysts expect their predictions of oversupply to be confirmed, on top of high inventory levels in South America.

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