North American Roundup 17 July

by Joanna Levin

Volatile weather drives US maize prices lower

CHANGING weather patterns meant US maize prices had a volatile week. But the market in general remains on a downward slide.

The Chicago September futures contract closed on Tuesday (July 14) at a contract low of 233.25¢/bushel, compared with 258¢ in the middle of last week.

Medium-range weather forecasts point to improved crop conditions for US farmers. Most market-watchers expect corn to get through the pollination period over the next couple of weeks without any problems from excessive heat.

But recent revisions by the US Department of Agriculture — which point to worsening oversupply — are also bearing down market.

The US government now estimates that carry-over stocks from the 1997-1998 season totalled 1.434 billion bushels, up from its previous estimate of 1.259 billion bushels.

The current 1998-99 season will yield an extra 1.844 billion bushels, more than the 1.609 billion bushels of carryover stocks previously expected.

US pig prices plummet

PRICES for US pigs and pork bellies collapsed by as much as 10% last week, in a market rout that took many traders and producers by surprise.

Market analysts are at a loss to explain the abruptness of the move. Some attribute it to continuing fallout from a recent quarterly US Department of Agriculture which revealed that the market is chronically oversupplied.

As reported over the past couple of weeks, the USDA calculated a 6% year-on-year rise in pig inventories last month to 61.6 million head. Breeding herd numbers rose 1% to 7 million head.

But some analysts say technical liquidation by speculators on the Chicago exchange has also driven the market lower.

The Chicago August lean hogs contract closed on Tuesday (July 14) at 50.7¢/lb, up a slight 0.23¢ on the previous day but down from over 55¢/lb at the start of last week.

Similarly, the August pork bellies contract closed on Tuesday at 52.47¢/lb after hovering around 60¢/lb a week earlier.

Meanwhile, in the cash market, the price for live pigs at terminals dropped from 38-39¢/lb a week ago to 32.5-34.5¢/lb.

Looking ahead to the rest of the year, the fundamentals for the American pig industry remain very bearish.

In the short term, however, many market participants argue the collapse is overdone and predict a small recovery. They argue that hot weather will discourage hog farmers from sending their animals to market and supplies could tighten up.

Feeder cattle prices fail to rally

STATESIDE feeder cattle prices failed to stage a rally this week, despite the weakness in the corn market.

Although cattle traditionally trade in an inverse relationship to the cost of feed, the continuing livestock oversupply in US feedlots is discouraging a price recovery.

Other factors are also keeping cattle prices down, not least competition from cheaper wholesale pork and a reluctance among packers to raise bids for slaughter cattle due to poor margins.

The Chicago August feeder cattle futures contract closed on Tuesday (July 14) at 70.55¢/lb, up a mere 0.28¢ from its contract low the previous day but down from around 73¢ early last week.

Meanwhile, packers have tried to drop their bids for live cattle in an attempt to improve their own profitability. This has made producers even more unwilling to sell and exacerbated the backlog in the feedlots.

Recent cash trading has taken place at 60¢/lb in Texas and Kansas and at 59.5¢/lb in Nebraska, little changed from a week ago.

The one area of the market to see some improvement is the light choice-grade beef cut-out, which rallied to 100.45¢/lb on Tuesday from 97.37¢/lb a week ago.

Traders report this is an expected rebound, following the traditional market drop in the aftermath of the 4th July public holiday. Hot weather in the US is buoying beef demand for barbecues this summer.

US wheat prices rally and then slump

THE US wheat market during the past week followed a similar pattern to maize — it staged a small rally and then sank back again on more favourable crop conditions.

The Chicago September futures contract closed on Tuesday (July 14) at 271¢/bushel, down from around 282¢/bushel at the start of last week and 292¢ at the peak of midweek trading.

As wheat continues to narrow its premium over maize, this grain is becoming increasingly attractive as an animal feed.

Last week, the US Department of Agriculture forecast that livestock would consume 400 million bushels of wheat in the 1998-99 season. But many market-watchers predict that consumption could actually surpass the record 482 million bushels consumed in 1990-91.

The extra feed usage could not come at a better time. Already, the Governor of Kansas has declared a state of emergency for wheat storage, thereby lifting some restrictions on grain elevators for wheat storage.

About 69% of the winter wheat crop has already been harvested, compared with 46% at this time last year. And with such a bumper harvest, America is simply running out of room.

Its a choppy week for soya

SOYABEANS have had a choppy week of trading, buffeted by changing weather forecasts and position-taking on the Chicago futures exchange.

The August futures contract closed on Tuesday (July 14) at 631.5¢/bushel, down from a midweek high of 662¢/bushel last week but up from week-earlier levels of 625¢/bushel.

Heavy rains in the south and south-east have improved crop conditions for bean farmers. In the north, the warmer weather is actually beneficial, although maize is under threat if it develops into a prolonged heatwave.

The more favourable growing conditions have encouraged the US Department of Agriculture to raise its estimate of carryover soyabean stocks for the 1998-99 season to 435 million bushels, from an earlier forecast of 425 million bushels.

Soya oil prices have slipped slightly in recent days on concerns of rising oil stocks. The Chicago August futures contract settled on Tuesday at 25.07¢/lb, down from a midweek high last week of 26.70¢/lb and a week-earlier figure of 25.6¢/lb.

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