US cattle supported by better demand
ONCE again, US cattle prices were supported this week by better demand and signs that the backlog of market-ready cattle in feedlots is beginning to clear. Increased orders from packing houses and fewer cattle entering the feedlots are pushing up prices.
Sales during March were 6% higher than last years. The number of cattle entering the larger feedlots was 16% lower. As a result, there were 8.16 million head in the feedlots in March, down from a record 8.77m a year earlier.
At auctions around the country this week, slaughter cattle gained 1¢/ lb to 66¢/ lb, while 450lb steer calves averaged 99.3¢/ lb, up from 99.0¢/ lb last week. On the Chicago futures exchange, the May feeder cattle contract closed almost unchanged at 76.95¢/ lb on Monday 20 April, down 0.175c from 77.125¢/ lb a week ago.
The number of cattle being fattened is still the second highest on record, however. And any slowdown in the slaughter rate risks the feedlots becoming overcrowded again, and could trigger another downturn in prices.
Analysts warn that it could be late summer before the industry finally catches up with supply. Carcass weights are 27lbs heavier than last year and some commentators speculate that owners have been holding out for better prices.
US farmers start to drill maize
ALL eyes are turned skywards as the corn (maize) planting season begins in the USA. Forecasts of wet weather in the pushed up maize prices early last week as rain threatened to delay drilling.
The May futures contract in Chicago closed at 248.6¢/bushel, up more than 3¢ on the previous weeks close of 245¢/bushel. But the price trend remains downwards, although forecasts of wetter weather could cause an upwards blip.
On the demand side, exports remain painfully slow. The US Government is expected to announce $100 million of export credits to South Korea to buy maize this week, and could approve another $350m of credits for maize and meal in the near future.
But analysts feel such a move will do little to tighten up what is essentially a slack market. Domestic demand is forecast to slow as the number of cattle eating corn in the nations feedlots starts to fall
US soyabeans bounce back from recent lows
AFTER months of decline from a high of over 900¢/bushel in May 1997, US soyabean prices managed to bounce back this week their recent lows. The May contract closed on yesterday (April 20) at 643¢/bushel, up from 627¢/bushel the week before.
Processor demand for soyabeans is healthy, and producers are holding out firmly for higher prices. Processors inventories are 1.6 million tonnes below last years levels so they will soon have to start buying in earnest.
But short-term blips in demand cannot disguise the dire oversupply situation for soyabeans. End-of-year US stocks are projected at 12.5m tonnes – the highest since 1985. This has combined with the record soyabean crop in South America to leave many traders cautious, arguing that only a bout of severe weather will cut output and trigger a significant rally in prices.
US wheat farmers are ahead of the game
THE US wheat market enjoyed mild support early last week as buyers sought cover for near months. Prices rose further on fears that bad weather could threaten spring wheat in the Canadian prairie and North Dakota.
Out in the fields, however, US farmers are well ahead of the game. USDA officials estimate that 12% of spring plantings are completed, compared with 4% last week, 3% last year and 6% on average. And experts are also forecasting a near-record winter wheat harvest.
The oversupplied market remains jittery, reacting closely to changes in weather forecasts during the planting season. Prices ended sideways on the week and the May wheat contract closed yesterday (20 April) at 298.6¢/bushel, almost unchanged on a week ago.
US pig market oversupplied
PIGS remain severely oversupplied in the USA, and pig farmers are pinning their hopes on an export boost to help firm up the market. As a result, lean pig prices were mixed this week following recent lows.
The June lean pigs contract closed on Monday (20 April) at 61.75¢/lb, up slightly from the previous weeks close of 61.175¢/lb and sharply above the 50¢ level seen at the start of the month. The market has now recovered to year-end levels, but is still well below the highs of over 85¢/lb seen last spring.
Better margins for the packers between the price of live hogs and carcass values are helping to firm prices. In addition, the 20% jump in prices at the start of the month has caused further upwards momentum as traders rush to cover short positions.
The National Pork Producers Council is lobbying the USDA to provide export credits to Korea to buy pork instead of grains. Total US pork exports are forecast to drop 5% in 1998 from 1997 due to the Asian economic crisis, at the same time as the slaughter rate is expected to hit a record 102 million pigs.
Without further “GSM” credits on top of the $150m already provided, Korea will be unable the buy more pork from the US, due to its weak currency, the NPPC argues. Not surprisingly, the National Corn Growers Association is far from happy with this line of argument.