CME: Export Markets Higher This Summer

by 5m Editor
3 October 2008, at 12:20pm

US - CME's Daily Livestock Report for 2nd October 2008.

Livestock futures were again sharply lower in Thursday trading on fears that beef and pork prices will continue to be negatively impacted by the slowing US economy. In addition to responding to the general swoon in commodity and equity values, however, a number of factors have been at play in the livestock complex:

  • Corn prices have declined sharply since their peak in late June. December corn futures closed limit down on Thursday and are currently almost 50% lower than a few months ago. Seasonally corn prices decline into harvest in October and this year is no different. However, recent USDA reports pointing to a slowdown in demand have clearly negatively impacted corn prices. Feedlots will likely take advantage of the current slowdown to cover needs for the next few months. However, noone really knows what the real economic impact of the current financial crisis will be and, with significant negative margins for much of this year, feedlots will have to make a really convincing argument to their bankers to get them enough financing to cover significant out-front needs.
  • Export markets were sharply higher this summer. That has boosted the value of some beef items that are popular for export and also lifted pork prices to all time record levels despite large numbers of hogs coming to market. There are plenty of indications, however, that export demand may be losing some of its luster. This is especially important for hog and pork prices, which have relied on exports to clean up much of the buildup in supplies. As we pointed out in the DLR a couple of issues ago, hog slaughter in the short term is expected to continue to be at all time record levels. As exports to Russia and China cool off, it cold spell plenty of problems for hog producers, even when supplies start declining next year.

5m Editor