CME: Livestock Futures Feel the Pressure

by 5m Editor
19 September 2008, at 11:05am

US - CME's Daily Livestock Report for 18 September 2008.

Livestock futures were again pressured lower on Thursday trading as markets feel the impact of the upheaval in the financial sector.

There continued to be plenty of talk that large funds were liquidating long positions and looking for increased liquidity. Also, at some point the decline becomes a self fulfilling prophecy. Live cattle futures were down as much as 230 points on the December 2008 contract while the June 2009 contract closed at a new contract lower and below the $100 mark.

Feeder cattle futures also declined, in part because of fund selling but also due to the decline in corn futures, which were down some 27 cents on the day. With the exception of the nearby September feeder cattle futures contract, all other feeder contracts established new contract lows. As for hogs, the market remains very unsettled at this time. While futures were a bit higher early in the day, they also succumbed to the selling pressure on all agricultural commodities, especially the decline in corn and cattle.

The export picture for pork also remains quite muddled, with reports that exports have slowed down some from the torrid pace of June and July but still notably higher than a year ago. The value of the US currency will continue to play a significant role in this respect. The dollar rose sharply against most major currencies for much of July, August and early September but the recent troubles in the financial sector have once again impacted the value of the dollar.

The outlook on the US economy and interest rates has becomes increasingly negative and there is some expectation in the market that the FED will have to lower rates again, probably as low as 1%. If so, that will tend to again pressure the US dollar lower, which would be supportive of agricultural exports in general. At this time foreign demand for US beef, pork and poultry remains good despite some warning signs. US beef imports, on the other hand, which have tracked significantly below year ago levels for much of 2008 should improve somewhat in Q4 as the value of the Australian dollar against the US currency has declined sharply. Also, there are reports that Russian global beef purchases have slowed down somewhat, which should bring more Uruguayan and Australian beef to the US.

Livestock Futures Trending Lower Since July

Dec Live Cattle, Dec Lean Hogs and Nov Feeder Cattle, July 1 = 100

5m Editor