Cattle futures rose the exchange maximum in Chicago – in sharp contrast to the slump in crop prices – after data showed buyers paying up for animals, even in the face of a stream of supplies from drought hit Mexico.
Futures in both live cattle, animals fattened for slaughter. and feeder cattle, those ready to be put into feedlots closed up the limit of 3.0 cents a pound, at their highest in nearly a month, even as grains and many soft commodities posted another session of heavy losses.
The jump followed reports of meat packers paying up to $109 per hundredweight for fattened cattle on cash markets, up some $3 on the day.
US beef export sales came in at 15,800 tonnes, according to weekly government data, keeping the country on track to complete its recovery, in trade volume terms, from losses sustained following a BSE outbreak in 2003.
'New trend higher'
The data were seen as fuelling a round of covering by speculators of short positions –that is, bets on falling prices.
"It's been a while since we have had cattle and feeder cattle up the limit," Mike Mawdsley at Market 1 said.
"Of course, funds have been short."
And the revival raised hopes of an end to a correction which, at its early-June nadir, took feeder cattle prices down 14% from their record high in early-April, and live cattle down 18%.
"Fundamentally, it feels too early for this upside breakout, but the market is saying it's time to go," Jerry Stowell at Country Futures said.
"The market now looks poised to start a new trend higher."
'Could endanger animals'
The rise in cattle prices comes at a time when many ranchers in the southern US and Mexico have been running down herds in the face of drought which has left little pasture.
Indeed, the "principal forage-producing states of Mexico are facing extreme drought conditions that could endanger animals, particularly if critical rainfall is not received in June and July", the rainy season for these areas, US Department of Agriculture analyst Rachel Johnson said.
Some 40% of Mexico is suffering a drought billed by President Felipe Calderon as the worst in seven decades – while 2010 was the rainiest year on record.
US cattle imports from Mexico, often this year for placement directly on feedlots given the shortage of pasture, have remained firm after jumping 28% in the first four months of 2011, compared with year-before levels
"These higher imports have been maintained in recent weeks, as weekly [official] data reports through the first week of June also show cattle imports from Mexico 27% higher year-over-year," Ms Johnson said.
Staying north
Conversely, exports of live sheep from the US to Mexico tumbled below 5,000 animals in the first quarter to their lowest in at least six years, and down by two-thirds on the same period of 2010.
US sheep exports to Mexico hit 22,000 animals in the April-to-June quarter last year.
The US Department of Agriculture will on Friday release monthly data expected to show placements of cattle on feedlots falling 7.8% in May from a year before, as supplies of feeder cattle wane.
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