North American roundup 17 November
US cattle price slide continues
CATTLE prices have continued on the slide that started lasted month, and traders are cautious.
The Chicago December live cattle futures contract settled on Wednesday (11 November) at 63.72¢/lb, down from 64.6¢ just over a week ago. Cheap pork is partly to blame.
With pig prices at 30-year lows and still falling, this is putting pressure on beef. Packers are unwilling to bid above 62¢/lb for live cattle, against offers of 64-65¢/lb and slaughter activity has slowed.
This compares with 63¢/lb paid by the packing houses last week.
Winter snowstorms are reported to be injuring cattle, but not enough to turn prices round. Producers are hoping that the monthly Cattle on Feed report, to be released this week, will show that the oversupplied industry is reducing.
Fewer store cattle are entering the feedlots for fattening. This, combined with lighter weights across the board and a higher slaughter rate could spell good news for cattle producers.
Current market prices are still well below break-even for most cattlemen. However, some analysts believe that the industry is now bottoming out and prices could soon start to show some improvement.
US pig prices the lowest for decades
PIG prices have now halved since the summer of 1997 as further price drops this week took the market to its lowest levels in decades.
In the futures market, the Chicago December lean pigs contract is at 34.15¢/lb on Wednesday (11 November), down from 35.52¢/lb just over a week ago.
The cash price managed to climb from 20¢/lb a week ago to 23¢/lb, but then quickly dropped back again to 21¢/lb on Wednesday.
The fundamental reason behind the market collapse is oversupply, with production up nearly 10% from last year. Even more capacity expansion is planned for 1999.
The perceived drop in Asian demand also damaged the market. Meanwhile analysts are pointing out that the US market has also been hit by larger shipments of live pigs from Canada to the US, a record 4 million pigs this year.
Talk of pork shipments to Russia in the form of food-aid can do little to help the market. A high slaughter rate is needed to handle the oversupply, but this in turn is pushing prices lower in the near future.
The losses being borne by US producers are astronomical, the worst market conditions since the Depression.
Some analysts are blaming pork retailers, who have failed to drop their prices in line with the wholesale market. They are able to pocket huge profits thanks to the wide retail margins.
Near-record maize crop for US farmers
AMERICAN maize farmers are winding up a bumper harvest that will produce the second largest crop and the second highest yield per acre on record.
On Tuesday (10 November), the Government raised its estimate of maize for this years production by 1% to 9.84 billion bushels. This is up 7% on 1997 with an estimated improved yield of 1.3 bushels/acre. Total predicted yield now stands at 133.3 bushels/acre.
This bearish news initially pushed maize prices lower, but some traders took advantage of the dip to buy up futures contracts, thereby dragging the market higher again.
The Chicago December futures contract settled on Wednesday (11 November) at 225.25¢/bushel, compared with 216.75¢/bushel just over a week ago. The market strength is likely to be short-lived given the overhang of corn in the market.
The US Department of Agriculture did raise its export estimate by 25 million bushels to 1.675 billion bushels because of a Russian food-aid deal finally announced last week. But this is a drop in the ocean. America will be left holding 1.779 billion bushels of carry-over stocks at the end of the season, up from 1.308 billion bushels a year ago.
All this maize will have to find a home. On the positive side, analysts point out that the relatively low domestic prices make US maize competitive against Chinese exports, which could help alleviate the oversupply situation.
US wheat prices stay low
WHEAT prices have firmed slightly over the past week, but are still well below the levels set at the end of October.
The Chicago December futures contract closed on Wednesday (11 November) at 292.5¢/bushel, up from 287.5¢/bushel just over a week ago. However, this was down from 300¢/bushel at the end of last month.
The market took little notice of news that the Government has cut its estimate of carry-over wheat stocks from 902 million bushels to 827m bushels.
Much of that drop is due to planned food-aid shipments to Russia which are already reflected in market prices. The ending inventory is still substantially higher than last years 722m bushels and this high stock level will maintain pressure on prices.
Meanwhile, the winter wheat crop is not yet far enough advanced to impact market sentiment. The planting is almost finished with 93% of the crop in the ground, in line with a five-year average of 94% at this point in the season.
Thanks to suitable initial weather conditions, 83% of the winter wheat crop has already emerged, also in line with expectations for this time of year. All eyes will be on the winter growing conditions in the USA, as well as weather forecasts for grain production in the Southern Hemisphere in coming months.
Soya beans up 5% in USA
SOYA BEANS have been the star performer of the US grain markets over the past week, soaring 5% to their highest levels since mid-July.
The Chicago November futures contract closed on Wednesday (11 November) at 579.75¢/bushel, up from 550.75¢/bushel just over a week ago.
After months of bad news for bean prices, traders seized on a Government report issued earlier this week that showed slightly lower production estimates, when many analysts had feared an increase.
The USDA shaved its output estimate to 2.76 billion bushels and its yield forecast to 38.6 bushels/acre. This is 0.1 bushel less than the October estimate. While the news is welcome for prices, American farmers are still flooding the market with the largest ever soyabean harvest this year, 2.76 billion bushels. This is up from last years record high of 2.70 billion bushels.
Thanks to a Russian food-aid package, the export estimate was raised by 10 million bushels to 840 million bushels. Overall, the nations ending soya bean stocks have been revised downwards to 365 million bushels from a previous estimate of 395 million bushels.
However, this is still a big increase in the overhang of inventory, up from 200 million bushels last year.
US farmers can afford to wait for better prices to sell their crop because of Loan Deficiency Payment (LDP) subsidies from the government. The domestic and export markets will be struggling to absorb this much soya well into next year.