USDA also made some changes to their beef balance sheet in the April supply and demand report. The 2008 beef production was increased by 145 million lbs to 26.682 billion. It was interesting to see USDA drop their import estimate by 140 million at 2.930 billion to offset the production increase. For demand, USDA decreased their estimate of beef exports by 25 million to 1.515 billion lbs, which made for a net increase of beef left on the US consumer's plate. Their cash cattle, price projections for the four quarters this year are $90, $91, $91, and $89. We would argue their second quarter estimate is too high, while the third and fourth quarter numbers are too low.
For Live Cattle, price gains the past few days were erased by this Wednesday's action at the CME, with prices Thursday back to the positive. There is speculation that one of the possible ailments that a Virginia woman has is the human form of BSE. We have to speculate this story is without merit. Other bearish factors were the corn numbers in Wednesday's supply/demand report. Higher corn could encourage feedlots to catch up on delayed marketings. In the big picture we remain bearish with an $82 to $85 objective for June futures. We are only hedged in the June and August, as we are bullish the post-summer period. Speculators may look at bear spreads such as selling the June and buying the December as well as holding those short $94 or $95 calls.
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