North American roundup 18 June

US cattle market gets the jitters

FEEDER cattle prices in the USA are volatile ahead of this Fridays cattle report. Traders are nervously waiting for any signs that the oversupply situation in US feedlots is abating.

The Chicago August feeder cattle contract climbed steeply during the first half of last week but then retreated in recent trading to close on Tuesday (16 June) at 74.5¢/lb, unchanged from Monday of last week.

After six months of falling prices, feeder cattle producers hope the recent sideways trading is a sign that the market is bottoming out. Packers, they hope, are working through the supply of live cattle.

But both producers and packers are suffering for terrible margins this year. Cattle owners are losing as much as $50-75/head, according to some industry estimates.

So far, there has been little change in the price of slaughter steers, with packers bidding 64¢/lb and owners offering at 66¢/lb. Demand for beef is expected to remain firm ahead of the Independence Day (4 July) weekend, a traditional barbecue holiday.

Choice grade beef cut-outs at 550-700lbs are trading at about 100.5¢/lb, compared with 98.8¢/lb a week ago. But many analysts expect beef prices to hit a ceiling at 102¢/lb because the industry is burdened with record-heavy slaughter weights.

US retailers coin it with pork

AMERICAN pork retailers are enjoying their best margins in ten years, benefiting from an ample supply of pigs in the domestic market which is depressing meat prices.

Pork prices as a percentage of retail prices have dropped from about 34% to a mere 22% over the past year, according to the US Department of Agriculture. Retailers are paying 57.4¢/lb for their pork cutout, compared with 58.7¢/lb a week ago and 74.2¢/lb this time last year.

Producers, however, are hoping that the futures market can be led higher by gains in the cash pig price. But it appears that market may be running out of steam.

The Chicago July lean pigs contract closed on Tuesday (16 June) at 62.8¢/lb, almost unchanged on the week. Meanwhile, the July pork bellies contract closed at 61.05¢/lb, down about 1/2¢ from last week.

Both markets have rallied strongly since March, with pig prices up 15% and pork bellies up 30%. But they have yet to return to their previous highs of late last year. And with a potentially bearish Government hog report due out at the end of the month, many traders are taking a cautious attitude.

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    Maize dips to new lows in USA

    MAIZE prices were depressed for most of last week, touching new contract lows before rebounding slightly on Friday on forecasts of adverse weather.

    In common with other grains markets, maize is oversupplied. Officials at the US Department of Agriculture last week forecast maize carry-over stocks would climb to 1.61 billion bushels for 1988-89, 350m bushels more than 1997-98.

    But export figures were better than expected, with inspections totalling 33.62m bushels for the week ended 4 June, well ahead of the expected 17-24m bushels.

    Nevertheless, analysts warn that the USA will have to export 380m bushels by August if the total export target of 1.48bn bushels for 1997/98 is to be achieved.

    That means exports must increase by 8% on the same period last year and, if the USDA is forced to lower its expectations and increases its crop yield forecast, prices will come under further pressure.

    The market closed narrowly mixed, with the Chicago July futures contract losing 0.75¢ on the week to close at $2.363/bushel. The December futures contract gained 1.75¢ to $2.448/bushel.

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    USA expects bumper wheat crop

    THE skies have opened over Americas Midwest grain belt and farmers are enjoying ideal weather conditions for their newly planted spring wheat crop.

    But once again, expectations of a bumper crop at home and poor export demand overseas have combined to drive wheat prices lower.

    According to early reports from Texas, the winter wheat harvest is showing better-than-expected yields, which will exacerbate the oversupply situation.

    The US Department of Agriculture (USDA) has raised its estimate of the winter wheat crop by 37 million bushels to 1.74bn bushels.

    About 93% of the winter wheat crop has headed, compared with a five-year average of 85% for this time of year. Farmers have already harvested 9% of their winter wheat, ahead of the normal 4%.

    Thanks to the ideal weather conditions, the carry-out of wheat stocks from the 1997/98 season is estimated at 764m bushels and the oversupply is expected to worsen.

    Next spring, the carry-out wheat stocks will climb to 827m bushels, the highest since 1990/91, according to revised forecasts from the USDA.

    Previously forecasts were only 766m bushels for spring 1999, but these were raised this due to lower Pakistani imports and higher Australian production. Australia is expecting a 10% jump in its new wheat crop yield, which is currently being planted.

    The Chicago July futures contract closed on Friday (12 June) at $2.793¢/bushel, down 1¢. Many analysts expect wheat to drop another 20¢ from here.

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    Weather rules US soya market

    THE US soyabean market had a choppy week on weather-related issues and ended mixed. The Chicago July futures contract lost 2.25¢ to $6.138/bushel, but the November contract climbed 5.25¢ to close on Friday at $5.875/bushel.

    At the start of last week, traders continued to react to bearish news of good growing conditions and better soil moisture in the Midwest. The rapid pace of planting and expectations of a high yield drove prices lower.

    Farmers have planted 86% of their soyabean crop, well ahead of a five-year average of 58%. Later in the week, soyabeans enjoyed some strength on forecasts of a high-pressure ridge moving into the soyabean-growing Corn Belt.

    The US Department of Agricultures latest supply/demand estimates, released last week, paint a bearish picture of severe oversupply.

    The estimate for 1997/98 carryover stocks of US soyabeans is unchanged at 240 million bushels, but the 1998/99 carryover forecast has been raised by 15m bushels to 425m bushels, the highest since 1986/87.

    In addition, Argentina is expected to produce 17m tonnes of soyabeans in its 1997/98 growing season, up from the previous USDA estimate of 16m tonnes.

    Following the 20% drop in soya oil over the past month, the market traded sideways most of the week and closed on Friday at 25.86¢/lb for the Chicago July futures contract, up 0.22¢ on the week.

    The precipitous drop in the market during May and early June reflects an expected increase in soya oil carryover stocks.

    The USDA on Friday raised its estimate of the 1998/99 carryover for soya oil to 1.395bn lbs from 1.18bn lbs. This compares with 1.435bn lbs in 1997/98.

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