North American roundup 2 June

High slaughter rate pushes US cattle lower

CATTLE prices fell in the USA over the past week, with buyers taking advantage of the relatively strong slaughter rate to bid lower for beef.

The lightweight choice grade beef cut-out fell below 100¢/lb last week to close yesterday (1 June) at 99.4¢/lb. Cash prices for slaughter steers lost a cent to 63.2 ¢/lb.

Although the high slaughter rate is depressing beef prices, the industry still needs to keep up throughput to work through a backlog of fed cattle in the feedlots.

Some analysts report that the supply of fed cattle is at a record high for this time of year. The slaughter rate dropped to 622,000 head last week from 706,000 head the week before and packers need to kill an average 700,000 head over coming weeks if feedlots are to work through their inventory.

Feeder cattle posted a week of daily losses due to fundamental oversupply, negative margins in the feedlots, and technical selling by Chicago traders. Even the drop in maize prices failed to support the feeder cattle market.

The Chicago July feeder cattle contract lost more than 2¢ on the week to close yesterday at 74.1¢/lb, a new contract low.

USA pigs bounce back

US PIG prices had another roller-coaster ride last week, bouncing back in the last two trading days after a sharp drop.

The Chicago lean pigs futures contract closed yesterday (1 June) at 61.8¢/lb, little changed from a week earlier but well up from a mid-week low of 60¢/lb.

Futures prices reacted to volatility in the cash market for live pigs and cash values fell 3¢/lb during last week to about 40¢/lb in Iowa and Minnesota and 41¢/lb at river terminals.

But the cash market bounced back yesterday, helped by a perception that the supply of pigs is tightening up. The market closed in Iowa at 40.00-41.50¢/lb and at 42.50¢/lb at the terminals. Many analysts forecast another 1¢ rally in cash prices over the next couple of days.

Despite this short-term rally, however, the domestic pig market remains depressed. Record pork supplies are estimated to jump from just over 17lbs billion in 1997 to around 18.5lbs billion this year.

And even though year-on-year exports rose 50% during the first quarter on a carcass weight basis, this only absorbed about a fifth of the increase in pork production during the same period. The US produced nearly 4.7bn lb of pork in the first quarter, compared with just under 4.2bn lb in the same period last year.

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    US maize market drops on better weather

    STATESIDE maize prices dropped sharply early last week because of ideal weather conditions for farmers and disappointing export demand.

    The market then drifted sideways and the Chicago July futures contract finally settled yesterday (1 June) at $2.38¢/bushel, down 8.5¢ on the week.

    Export sales for the week ended 21 May were disappointing at 17.0m bushels, 27% below the four-week moving average for export sales. Mexico, Taiwan and South Korea were significant buyers.

    Traders say that if old-crop exports remain low, then total exports for 1997/98 could reach only 1.40bn bushels, compared with forecasts of 1.48bn bushels. That would result in higher carry-over stocks to burden an already oversupplied market.

    Maize planting is almost finished, well ahead of schedule. At this time of year, farmers usually have only 80% of the crop in the ground. Agronomists say yields this year could be higher than usual, as pollination could occur before the onset of an expected hot summer.

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    Five-year low for US wheat

    WHEAT prices in the USA sank to a five-year low this week, with many analysts expecting supplies and poor export demand to drive the market even lower.

    Almost 90% of the winter wheat crop is already headed, compared with a five-year average of 77%. The harvest is well under way in the southern Plains and there are reports of higher-than-expected yields and excellent protein content.

    Favourable weather conditions for the spring crop and poor export demand are also pressuring prices. More than 90% of the spring wheat crop has emerged, well ahead of schedule.

    Many exporters are concerned about the possible loss of Pakistani business because of economic sanctions. The Chicago July futures contract settled yesterday (1 June) at $2.84/bushel, down 14¢ on the week.

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