EVERYONE along the cattle supply chain seems to be losing money these days. US feedlots, where cattle are fattened ready for the packing house, have been unprofitable since last fall, with losses averaging $100-150/head.
A severe surplus of fat cattle in the feedlots ready for slaughter means producers are suffering. Fat cattle supplies on March 1 were 23% higher than the average for the past five years, but last month owners shipped 3% fewer fat cattle to the packing houses than a year earlier.
However, some bullish traders estimate that the situation has bottomed out. They believe that packing house orders will start to pick up, freeing up space in the feedlots and raising demand for feeder cattle. This sentiment contributed to a small rally in prices last week.
May feeder cattle prices – which tend to move in inverse relation to the corn price – rallied to close on Friday April 3 at 76.525¢/lb (46p/lb), compared with 73.8 cents/lb a week earlier. But beef prices dropped last week as packers sought to shift inventory. Feeder cattle prices and last weeks drop in the grain market helped
The Asian economic crisis continues to hurt US beef exports, especially to Japan and Korea. The depreciation in the Korean Won has caused a sharp reduction in hide exports to this major destination from 40% of total exports to 34%.
Maize rallies in USA despite higher plantings
USUALLY, news that US farmers have planted less corn (maize) would cause prices to rally. But, last week, the market did the opposite.
July maize futures moved down sharply to end trading last Friday (April 3) down 8.25¢ on the week to 260.6¢/bushel (156p/bushel). December maize dropped 1-2¢ to 272.4¢/bushel.
According to the USDA, farmers intend to plant 32.7 million hectares of maize this year, up slightly from 32.5m hectares last year, but substantially lower than traders expectations of 33.4m hectares.
So why did the market react bearishly? One explanation is that the USDA also announced lower-than-expected wheat plantings, resulting in a shortfall of 1.1m hectares in analysts combined maize and wheat forecasts. The result? traders refused to believe the USDA figures because they dont seem to add up.
In any case, these figures are the result of a survey conducted on March 1 and may change if the sodden conditions in the south-eastern states disrupt the normal planting season and cause last-minute changes in the crop mix.
Couple this with news of improving weather, poor exports and ample stocks of old crop still available, and traders are selling off. Maize stocks on March 1 were reported to be 125m tonnes – 2.5m tonnes higher than trade estimates and up nearly 10m tonnes from a year ago.
The market could rally if the wet weather in the Corn Belt forces US farmers to delay their planting, but most analysts expect the downward trend to continue.
USA pig prices slip again
THE US hog (pig) market rallied early last week on news of forthcoming export credits for pork to South Korea, as well as obstinacy on the part of producers who refused to sell at lower prices to US packers.
But prices slipped again late in the week due to fears of oversupply and large amounts of pork in cold storage.
The June lean pigs contract closed Friday April 3 at 50.2¢/lb (30p/lb), compared with 58.575¢/lb a couple of weeks ago. And yesterday (Monday April 6), the market was sharply lower in early trading.
Pork production in February dropped 10% from January and monthly cold storage actually rose 4% in February from Januarys stock level of 446m lbs, indicating a drop in consumer demand.
US producers are building new pig-rearing facilities and there could by 7-9% more pigs ready for slaughter over the next six months compared with last year.
Lean pig prices are at their lowest since spring 1995. Brokers remain extremely cautious. The ongoing economic upheaval in Asia and currency depreciation in many Asian countries, especially Korea, is hurting pork exports significantly.
American soyabean markets increasingly bearish
THE soyabean market in the Americas increasingly bearish. If, as expected, US farmers plant a record high of 29.1 million hectares of soyabeans this year, they will produce about 76.5m tonnes, compared with an optimistic demand projection for only 71m tonnes.
The May futures contract lost 9¢/bushel during the week ended April 3 to 637.25¢/bushel (383p/bushel) – its lowest point since last October. The contract – which rallied to a high of 750¢/bushel last November – has been declining ever since. July beans fell 10.25¢/bushel on the week to close at 838.25¢/bushel.
Traders estimate carry-over stocks will now exceed 12.5m tonnes – or perhaps more if overseas oilseed supplies are lower priced. Soyabean stocks have only once before exceeded 13.6m tonnes and that was in 1985.
Poor weather could cut 1998 crop yields. But most traders remain bearish about the oversupply situation. In the Southern hemisphere, the heavy rains in Brazil have contributed to a bumper crop, but there has been no significant delay in the ongoing harvest.
Brazils soyabean crop is estimated at 30.6m tonnes, up a strong 14% from 1997. Thanks to El Niño, production in Brazil, Argentina and Paraguay is estimated at a record 48.9m tonnes, up 20% on last year. But the wet weather is making it difficult to load soyameal on to ships without risking a wet cargo.
Brazils exports have been delayed and shipping could drag on till October or November, overlapping the US harvest season. Last year, Brazil finished exporting its crop by July.
Downward trend in US wheat continues
THE downward trend in US wheat prices continued last week. Wheat contracts for May closed last Friday (April 3) at a contract low of 311¢/bushel (187p/bushel), down 10¢/bushel on the previous week.
Farmers in the USA intend to plant less wheat than expected this year. USDA planting estimates total just 27 million hectares – well below most traders estimates and 1.6m hectares down on last season.
Despite lower-than-expected wheat planting, stocks are still high, with 1998 year-end levels projected at 20-25m tonnes. The only previous year when stocks exceeded 19m tonnes was 1990. This gloomy picture of oversupply is depressing prices further and driving many smaller farmers out of business.
Better weather in the western belt of the USA last week drove wheat prices down and the region is now enjoying ideal growing conditions. Higher temperatures in the Great Plains and Midwest have reduced fears of frost damage to the winter wheat crop.