Commodity Spotlight Agriculturals
Comment of the Day

September 26 2013

Commentary by David Fuller

Commodity Spotlight Agriculturals

My thanks to a subscriber for this interesting report which is posted in the Subscriber's Area along with my additional comments
As compared with its mid-June level, the price of live cattle in Chicago is up 10% at 130 US cents per pound. Feeder cattle prices are now even higher than the record levels they achieved in the first half of 2012. Although prices are all reacting in the short term to the processing figures from the abattoirs and to the upcoming public holidays, the bigger picture is determined by cattle numbers: The number of animals added to the feedlots has been declining for months. This will further reduce the supply of cattle ready for slaughtering and thus of beef in the medium term, which ought to continue ensuring high price levels

David Fuller's view I assume that we are in the latter stages of this bull market for feeder cattle (weekly & daily) and live cattle (weekly & daily), during which the former is clearly the leader at present.

Last year's horrendous drought in the USA's West and Mid-West regions was the worst in a series of poor crop cycles of near Biblical proportions. This caused feed stock prices to surge and brought forward cow slaughter rates. Consequently, there are fewer young cattle available for breeding.

However, record prices for beef, at least in nominal terms, will reduce consumer demand next year, while increasing imports. Additionally, corn prices are now much lower so there will be little disincentive to increasing herds, although this will obviously take a while. Let's keep an eye on the cattle charts because this maturing bull market will be followed by a bear market which should begin at some point in 2014.

(See also Eoin's comment yesterday.)

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