Stateside pig prices fly — and head for a fall
PIG prices in the USA have soared. Last week, pigs were fetching about 40¢/lb. This week they are making up to 48¢/lb in parts of Illinois.
The 20% jump in prices is partly attributed to the drop in the daily slaughter rate to 334,000 animals, compared with 355,000 head a week ago.
But fewer slaughterings are insufficient to justify higher prices, many analysts fear. These traders believe that the cash market is overextended after its recent rally and are predicting a price correction. Packers reluctance to do much forward pricing is being taken as another sign that the market may be heading for a fall.
This cautious attitude is reflected in futures prices, which came off sharply yesterday (19 May). The Chicago lean hog June futures contract closed at 61.97¢/lb, down 0.68¢ since Monday but still up 0.30¢ on last week.
Gloom over USA soya markets
FAVOURABLE seeding conditions in the midwest have driven US soyabean prices lower in recent days. The spring crop is estimated to be 38% planted, ahead of the five-year average of 23%.
Soyabean futures contracts closed sharply lower on 19 May 19, after drifting downwards all of last week. The Chicago July contract settled at $6.32/bushel, down 12¢ on the previous days close and 20.25¢ lower on the week.
In addition to bearish weather forecasts, beans have also come under pressure due to soya oil weakness. The oil market, which had rallied to its highest level since early 1995, was this week hit by news of an upward revision in the April monthly oil stocks.
Official figures increased the amount of oil in store by 84 million lb to 1.405 billion lb. Profit-taking and weakness in the Malaysian palm oil market also took their toll on US soya oil prices. The July Chicago contract closed on 19 May at 27.58, down 1.98 from on the week.
Drought threat to N American maize
WITH spring planting and early crop development progressing well, US maize prices remain under pressure. The spring crop is 78% in the ground – lower than the 86% planted this time last year, but still well ahead of the 63% five-year average.
Most players are bearish on the short-term outlook due to ten-day weather forecasts that indicate ideal planting conditions in the midwest.
Longer-term, however, some analysts predict a drought in July or August – La Niña, the sequel to El Niño. But farmers need the weather to stay wet for long enough to provide good growing conditions for their spring crop.
In Chicago, the July futures contract closed on 19 May at $2.45/bushel, down 10.75¢ from the start of last week. But more July drought forecasts could trigger a weather scare and drive prices higher as market watchers might anticipate crop damage this summer.
Supply and demand push down US wheat price
INCREASED supply and disappointing demand continue to drive down US wheat prices. And with the spring crop already 90% planted, a bumper 1998 harvest could boost supplies even higher.
Short-term weather forecasts indicate excellent growing conditions in the USA and Canada. The winter wheat crop is already well advanced, with 60% headed, compared with a five year average of 48%.
The US will start to harvest what analysts expect to be a bumper winter crop during the next two weeks. But farmers face lower returns in a market where export demand is falling short.
Only just over 10 million bushels of wheat were inspected for export during the week ended 7 May, compared with market expectations of up to 15m bushels. And to make matters worse for those hoping for better prices later in the season, farmers in some regions face a shortage of storage space.
The Chicago July futures contract closed on 19 May at a contract low, falling below the psychological $3.00/bushel mark to $2.99/bushel, down 13.5¢ from the start of last week.
Over-supply in US cattle business?
THE latest survey of US feedlot activity is mildly bullish for the cattle market, but many analysts remain cautious. The number of cattle in feedlots at the beginning of this month was 8.3 million head, 2% less than the population a year ago, according to the US Department of Agriculture seven-state survey.
At first glance, this would suggest that the industry is working through its backlog of cattle. But the number of feeder cattle actually rose year-on-year for the first time since September, climbing 5% from May 1997 to 1.36m head.
The only way to avoid exacerbating the oversupply in the feedlots will be to step up the slaughter rate. The latest figures show marketings were down 2% from a year earlier at 1.6m head.
Around the market, prices were lower on the week. Packers dropped their bids for live cattle to 63¢/lb on yesterday (19 May) from 66¢ ten days ago. This depressed futures prices, with the Chicago August feeder cattle contract closing at 76.07¢/lb, compared with less than 78.50¢/lb at the start of last week.
The boxed beef market has eased off slightly on improved supply, but is expected to recover over Memorial Day weekend, 23-25 May. The choice grade cut-out for 550-700lb animals closed down a cent on the week on Friday, 15 May at 102.5¢/lb.