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Published June 21, 2011, 09:00 AM

Ag market surprises

The past week held many surprises in ag markets. The biggest surprise came in the form of a bottom on seasonal timing, but huge demand was the fundamental reason.

The past week held many surprises in ag markets.

The biggest surprise came in the form of a bottom on seasonal timing, but huge demand was the fundamental reason.

The continual possibility of declining supplies and production in sync with huge export sales and demand while world economies quiver in fear of any one of the Eurozone nations — Portugal, Italy, Ireland, Greece and Spain — defaulting appears to have taken the high road in price discovery.

Feed forecast

While feed prices have gotten a small reprieve, placements, in advance of the release of cattle-on-feed numbers, were forecast to see a decline for May.

If so, this plays right back to tightening supplies down the road.

However, it isn’t just the price of feed that may cause a decline in placements, but also the dramatic pull ahead of lightweight animals to the feedlot because of the lack of good pastures, which have endured the worst drought since 1895 in Texas and parts of Oklahoma.

Cows have gone to slaughter and calves placed into feedlots earlier than normal should mean a further tightening of supplies toward December and into February.

Beef production

USDA, in its monthly supply and demand report, continued to leave its beef production estimates the same but showed another increase in exports. One way to ration corn is to import a product such as beef or pork instead of feeding the animals in foreign countries, where coarse grains are growing tighter in supply.

Business remains solid with all U.S. beef customers. The movement of boxed beef June 16 was the largest since November 2009.

The fly in the ointment will be the world economies and the U.S. domestic economy going for a double dip. Will that happen?

Housing stocks had been holding quite well in the past month. I tend to look for another quantitative easing that is directed toward housing. A bottom in the housing market? Things appear to be a No. 10 when it comes to horrible, so the time may be right.

The cash cattle market was forecast to be steady at best this past week but ended up $3 to $4, with packers having to raise bids to buy cattle. That comingled with fabulous movement and exports.

Sounds like a market fishing for a seasonal bottom.

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