In Friday’s cattle report, the USDA said feedlot inventories totaled 11.22M head on Aug 1, up 1.4% from a year ago. New placements onto feedlots were larger than expected in July, up 1.8%, following 3 straight monthly declines. Drought continues to be the driving factor, forcing producers to liquidate feeders at younger ages and lighter weights.
Read MoreButter prices hit 7-year highs of $3.06/lb on 8/3 before backing off to $2.9350 (8/12). Butter output in June was up 2.3% from a year ago, but first half 2022 production was down 2.8% from 2021. Cold storage supplies are 20.0% below year ago levels. Cream availability is tight and Thanksgiving baking season will likely be here before supplies can recover.
Read MoreHighly Pathogenic Avian Influenza (HPAI or Avian Flu) may finally have run its course this year, with no new cases over the past 2 weeks. But the damage has been devastating. By our calculations (so far in 2022) HPAI has resulted in the culling of 30.8M egg layers, 5.4M turkeys, and 2.4M broilers. Throw in pullets, turkey layers, and other species, and the U.S. lost 40M birds this year.
Read MoreThe AAA average for regular gasoline was $4.22 per gallon on 7/30, down from a high of $5.01 in mid-June, but still up 33% from $3.17 a year ago. WTI crude oil futures, at $98.62 per barrel, were still north of $120 just a month ago. Forecasts for weaker global oil demand, plus rising U.S. inventory levels, precipitated the price declines.
Read MoreIn Friday’s cattle report, the USDA said feedlot inventories were 11.34M head on July 1, up 0.4% from a year ago. However, new placements onto feedlots in June were down 2.4% - and will likely continue to decline through the 2nd half of 2022. Heifers accounted for 39.2% of feedlot inventory, up 2.9% from 2021, and far exceeding the 36% threshold that historically indicates herd liquidation.
Read MoreInflation fears remain front & center. Consumer prices (CPI) increased at a 9.1% annual rate in June, a 41-year high. The Fed raised the federal funds rate by 3/4 of a percentage point on 6/15, and another 3/4-point increase is expected later this month. Two more half-point increases are likely after that, taking rates from roughly zero to 2.5% in 2022.
Read MoreAfter peaking at $.90/lb in April, soy-oil futures have declined to $.6407 (7/8) – roughly where they were a year ago. What’s changed? Because of biofuel policy, soy-oil prices are now correlated (over 80%) with crude oil. Crude peaked at $123.70 per barrel in March but has since dropped to $104.79. Also, Indonesia rescinded its palm oil export ban and is still struggling to unload excess supplies accumulated during the ban.
Read MoreProtein supplies continue to tighten. In its June 24 cattle report, the USDA said feedlot inventories were 11.85M head on June 1, up 1.2% from a year ago. However, new placements onto feedlots in May were down 2.1% - and will likely continue to decline through the 2nd half of 2022, leading to lower beef supplies. Blame it on drought and sky-high hay & feed prices.
Read MoreThe Biden administration (and the country) need lower gasoline prices. Unfortunately, you can’t accomplish that when you condemn oil producers and the Saudis on one hand, and then ask them to invest in expanding output on the other. Even so, drilling/production right now are secondary to the need for additional refineries.
Read MoreThe Fed tried to lower the hammer on inflation last week, raising the federal funds rate by 3/4 of a percentage point. Economists are expecting 3 more half-point increases this year, which would take rates from roughly zero to 2.25% in 2022. The first casualty will be the housing market. Freddie Mac said 30-year mortgage rates hit a 14-year high of 5.78% last week, up from just 3.11% in Dec 2021.
Read MoreSoy-oil prices stabilized in May after Indonesia – the world’s top producer and exporter of palm oil - lifted its ban on palm oil exports. U.S. soybean oil futures hit a record high of $.9060/lb on 4/28, but have since backed off to $.8081 on Friday (6/10). Soy-oil averaged $.5815 in 2021, following a 6-year stretch (2015-2020) of averaging just $.3117/lb.
Read MoreI’m an analyst. I evaluate issues on their merits. And it seems clear to me that the Biden Administration’s new framework to “transform the U.S. food system to benefit consumers, producers and rural communities” will do absolutely nothing for the restaurant industry. The USDA said the program is designed to “improve the food supply chain and create a more resilient system.” How?
Read MoreFollowing 2 years of stimulus-fueled spending, consumers are running on empty as savings dry up and inflation takes its toll. Compared to a year ago crude oil is $115.07 per barrel vs $66.85, the AAA national average for gasoline is $4.62 per gallon vs $3.04, and natural gas is $8.73/M btu’s vs. $2.96, which will increase the cost of air conditioning this summer.
Read MoreFriday’s Cattle on Feed report confirmed historically large numbers of cattle awaiting slaughter over the next few months. The USDA said feedlot inventories, at 11.97M head on May 1, were up 2.0% from a year ago. Multiple years of drought and high feed costs have prompted ranchers to liquidate herds and to push pasture-feeders onto feedlots at younger ages.
Read MoreBy our calculations, Highly Pathogenic Avian Influenza (HPAI or Avian Flu) has resulted in the culling of 28.5M egg layers, 4.9M turkeys, and 1.7M broilers. The egg-laying flock is 7% lower than a year ago. The USDA has bumped its 2022 egg price forecast from $1.36 per dozen to $1.96 over the past 2 months (vs $1.18 for 2021). HPAI has mostly spared the broiler flock.
Read MoreThe March CPI was up 8.5% from a year ago, the largest jump since Dec 1981. Soaring wages are still running well behind inflation, prompting workers to push for even more money. Economists call this a wage-price spiral. Most analysts underestimated both the pandemic’s longevity and the extent of its effects on supply chain.
Read MoreLast week, Indonesia began enforcing a ban on palm oil exports in an effort to bring down domestic prices ahead of the Muslim festival of Eid al-Fitr, which marks the end of fasting during Ramadan. As the world’s top producer and exporter of palm oil, Indonesia accounts for a huge 35% share of all global veg-oil trade.
Read MoreFriday’s Cattle on Feed report was near-term bearish and long-term bullish for cattle prices. The USDA said feedlot inventories, at 12.11M head on April 1, were up 1.7% from a year ago. Multiple years of drought and high feed costs have prompted ranchers to both liquidate herds and to push pasture-feeders onto feedlots at younger ages.
Read MoreUkraine accounts for 80% of the world's sun-oil trade, which works out to 12% of all globally traded veg-oils. That 12% is lost for now. Palm oil is also in short supply due to Covid-driven production issues and Indonesian export restrictions. Now, new biofuel initiatives mean that sky-high crude oil markets can (and will) drag soy-oil prices higher.
Read MoreIf you were to judge by market reactions, traders did not put a lot of faith in Friday’s bearish (for prices) USDA WASDE report. In corn, the USDA left U.S. corn ending stocks unchanged and didn’t increase exports – while most analysts expected projected U.S. exports to jump due to a 16% (and growing) decrease in Ukrainian corn exports.
Read More
^TOP