Commodity Blog

Commodity Prices – Beef

Cattle futures climbed today, following yesterday’s drop. Futures fell yesterday after a case of bovine spongiform encephalopathy (or simply mad cow disease) was discovered in the United States. Four biggest importers of US meat (Canada, Japan, Mexico and South Korea) said that they will continue to buy US beef, causing prices to rebound today. Live-cattle futures for delivery in June rose as much as 1 percent to $1.12675 per pound as of 11:01 on CME, following yesterday’s drop by the exchange’s 3-cent limit to $1.11575.

Crude oil advanced today after the Federal Open Market Committee said that the US economic recovery will gradually accelerate over time. The FOMC left the monetary policy unchanged today and said in the statement that it “expects economic growth to remain moderate over coming quarters and then to pick up gradually”. US crude oil inventories increased by 4.0 million barrels, while total motor gasoline inventories decreased by 2.2 million barrels last week. June futures for delivery of crude oil advanced $0.84 (0.8 percent) to $104.39 per barrel by 13:33 on NYMEX, while earlier it reached $104.57, the highest level in a week. Brent crude climbed from $118.33 to $119.08 per barrel as of 18:33 GMT on ICE today, while earlier it declined to $117.45.

Gold fell as demand remained low despite the festival in India that is considered to be a good time to buy precious metals. The uncertain political situation in France and Netherlands also damps demand for the metal. On the other hand, data shows that central banks across the world continue to buy gold for expanding their reserves. Gold price fell from $1,641.30 to $1,629.90 on COMEX today.

Cattle prices jumped and feeder-cattle futures reached a record yesterday as there was a deficit of animal available to slaughter-houses in the United States, while demand for beef rose. Meatpackers have processed 3.6 million cattle this year, 5.4 percent less than in 2011. The USA exported 2.8 billion pounds (1.3 million metric tons) of the meat last year, 21 percent more than a year ago. Prices for wholesale beef grew 3.4 percent.

Lane Broadbent, a vice president at KIS Futures Inc., commented:

Packers are having to buy cattle on the sellers’ terms. Demand is still very good overseas and very solid domestically. You get increasing demand and tighter supplies, and that will mean higher-priced cattle.

April futures for delivery of cattle rose 0.9 percent to $1.2925 per pound on CME. Contract for delivery of Feeder-cattle in March advanced as much as 1 percent to $1.5625 per pound, while touching the record of $1.568 earlier. Wholesale beef settlement jumped to $1.8769.

Cattle prices touched a record for the fifth time this month as cattle suppliers are unable to keep up with rising demand for US beef. Farmer’s haven’t been able to provide enough supply to meatpackers as drought made them to cut herds earlier this year. Prices for feeder-cattle also rose. April futures for delivery of cattle gained 0.5 percent to $1.285 per pound by 9:27 on CME and reached the record high of $1.29325 earlier. March contract for feeder-cattle deliver went up 0.5 percent to $1.547 per, while earlier the settlement reached the all-time high of $1.55275.

Orange-juice futures also reached a record today. Citrus crops in Texas were hit by greening disease that has already caused an extensive damage to plants in Florida. At the same time, the US Food and Drug Administration halted juice imports from Brazil to check for banned fungicide. Futures for delivery of orange juice in March rose by the exchange limit of $0.1 (5 percent) to the record of $2.1065 per pound as of 11:00 on ICE.

Crude oil declined today as threat of sanctions against Iran lessened. There are rumors that the International Atomic Energy Agency will discuss with Iran its nuclear program. In the meantime, European Union officials said that an embargo on Iranian oil exports may be postponed for six months. There is no more rush to buy oil and prices reacted accordingly. February futures for crude oil delivery slipped $0.79 (0.8 percent) to $98.31 per barrel by 13:36 on NYMEX. Brent oil declined from $111.01 to $110.91 per barrel as of 20:53 GMT today on ICE, while earlier it touched $109.71 — the lowest price since January 3.

Cattle advanced as demand for beef rose, while supply decreased. Beef price increased 5 percent in the United States this year, following the 10 percent increase in 2011. Beef exports jumped 25 percent in the 10 months ended October 31 from a year ago, while cattle herds were record small last year. April futures for cattle delivery rose 0.9 percent to $1.264 per pound at 13:00 on CME.

Cattle prices posted a record for the second time this month as prospects of rising beef exports from the US spurred the speculation about tightening supply.

US exports of beef rose 27 percent over the year ended August. The US Department of Agriculture predicted production of beef will decline 4.9 percent in 2012 as high feed costs caused farmers to trim their herds.

The positive fundamental reports from the US helped commodities, including cattle. The retail sales rose, the import and export prices increased, while the federal budget deficit shrank.

December futures for cattle delivery rose 0.3 percent to $1.232 per pound as of 13:00 yesterday on CME, following the advance to the all-time record $1.243. Prices advanced 1.1 percent over this week. The previous all-time high was reached on October 3.

US farmers may cut most of their breeding cows to reduce losses because of drought. Texas ranchers may sell or slaughter 500,000 beef cows as the dry weather made them to expensive to feed. The losses of the states’ farm may reach $5.2 billion as the past 11 months were the driest since 1985 in the region. December futures for delivery of cattle advanced 1.1 percent to $1.192 by 13:00 on CME.

India’s production of sugar may reach a highest level in four years. Analysts predict the output may total 25.83 million metric tons in the year starting October 1, compared with 24.2 million tons estimate for this year. The high production may prompt India to lift the limit on exports. The resulting boost of supplies on global markets can drive prices down. Sugar spot price fell 1.1 percent to $0.2760 from $0.2790.

Cocoa fell on as concerns about the political tensions in the Ivory Coast eased. The troops of Alassane Ouattara, the internationally recognized winner of the presidential election, gained control of the capital. May future for cocoa delivery fell as much as $70 (2.3 percent) to $2,987 per metric ton as of 12:06 on ICE.

Cattle futures jumped to the record on the anticipation of higher demand from Japan. The retail prices for beef in the US touched the all-time high last month as supplies declined. June futures for cattle delivery rose $0.01675 (1.4 percent) to $1.19575 per pound by 13:00 on CME. The price rose to the record $1.198 earlier.

Soybeans gained to the highest level in a week on the speculation that supply may decline as farmers prefer to plant corn. US Farmer may forecast to plant 76.79 million acres with soybeans this year, compared to the previous forecast of the US Department of Agriculture of 78 million acres. May future for soybeans delivery added $0.08 (0.6 percent) to $13.695 per bushel at 10:41 on CBoT.

Cattle jumped to the record as demand for US beef increased. The US Department of Agriculture reported that the US beef exports advanced as much as 19 percent last year to about 1.04 million metric tons. Increasing demand put strain on supplies of meat, making the US cattle herd the smallest since 1958. June futures for cattle delivery rose $0.0155 (1.3 percent) to $1.1745 per pound as of 13:08 on CME. Previously the price reached the record level of $1.18.

Wheat and corn posted the first gain this week on the concern that the global inventories may decline. The USDA is expected to reduce its estimate of the world supplies tomorrow. The experts say that Saudi Arabia will increase its imports of food to prevent increase of food prices, as the surge of the prices was one of the reasons for the uprising in Tunisia, Egypt and Libya. May delivery for wheat gained $0.07 cents (0.9 percent) to $7.8675 per bushel by 13:14 on CBoT. May delivery for corn added $0.045 (0.6 percent) to $7.10 per bushel.

Cattle futures rallied to the highest level in 26 months on expectations that demand from meatpackers will increase ahead of holidays, such as Christmas and New Year. Wholesale choice beef rose to $1.5901 per pound at midday after it fell yesterday for the first time in five sessions. February futures for cattle delivery rose $0.00525 (0.5 percent) to $1.05025 per pound at 13:00 on the CME.

Corn, cotton and soybeans dropped today on speculation that China may take steps to cool its economy. China, the largest world user of soybeans and the second-biggest consumer of corn, ordered its banks to increase reserves to cut inflation and prevent asset-bubble. March futures for corn delivery dropped $0.21 (3.8 percent) to $5.3475 per bushel on CBoT as of 13:15. March futures for cotton delivery slipped $0.06 (4.6 percent) to $1.2315 per pound by 14:49 on ICE. January futures for soybean delivery went down $0.405 (3.3 percent) to $12.015 per bushel in Chicago.

Cattle futures surged as unusually hot weather in US may cause decrease of animals’ weight, reducing beef supplies from the US. Hogs prices also rose. Animals tend to gain less weight when weather is hot as they eat less food. And weather is hot as average temperature in major cattle-producing states was 43 degrees Celsius (110 Fahrenheit).

Average weight of steer carcasses at slaughter was 391.5 kg (863 pounds), 2.9 percent less compared to the same period in the previous year. CME-monitored inventories of pork bellies dropped 73 percent in the year through July after hog producers in the US cut herds to curb their losses in 2008 and 2009. Low supplies should support prices. On the other hand, high prices may damp demand from retailer.

October futures for cattle delivery rose $0.01575 (1.7 percent) to $0.958 per pound as of 11:44 on CME. October futures for hog settlement went up $0.0015 (0.2 percent) to $0.79075 per pound.