On Thursday, October 17, prices for December future of livecattlehave updated their 9-month high of 134 dollars per pound; it has then rapidly rolled away and is currently traded at about 132 dollars per pound. Generally speaking, the uptrend has been characteristic of the market since 2008 and is primarily connected with shortage of cattle stock in the USA.
What will happen to the future oflivecattle, and what are its perspectives for traders? These issues have been studied by the Analytics Team of “Exchange News” Department of the “Market Leader” magazine and experts of Options Trade Department of Masterforex-V Academy.
Traders on Perspectives of Cattle Future
According to the Analytics Team of Options Trade Department of Masterforex-V Academy, in mid-term perspective cattle market is likely to move within the framework of 131-134 dollars per pound.
Traders of Options Trade Department recommend abstaining from effecting transactions with this tool.
Experts on Global Tendencies Influencing Cattle Future
Speaking about the situation worldwide, it is the following:
1. Global picture of beef supply has changed rapidly within the last three years, and, according to the Analytics Team of Options Trade Department, these changes will continue influencing the price formation in 2014 and 2015. We have recently considered some statements and assessments of US Ministry of Agriculture on cattle inventory of top global beef exporting countries. Please note that this is not the official assessment of US Ministry of Agriculture. The figures in the table should be considered as recommendations, which are to be reconsidered when official data is published by USDA.
2. At the time when cattle stock in North America keeps falling, it is increasing in South America and Oceania. At the beginning of 2014 cattle stock in Australia is expected to be 8.6% higher than in 2011, in Brazil – 9.3% higher, and in New Zealand it is expected to increase by 2.7%. On the other hand, cattle stock in the USA is expected to drop by 5.1%, in Canada growth will amount to 1.9% only, whereas in Mexico the reduction will be rather impressive in comparison to 2011, namely, 19%.
In our opinion, some tendencies of the current year will be even more intense in 2014. The countries that are consumers of beef from North America will have harder times, and the products will become more and more expensive.
3. China and Hong Kong have lately shown themselves as main global buyers of beef. China has rapidly increased purchases of beef from Australia, Uruguay, and New Zealand. Hong Kong has rapidly increased import of Brazil and American beef.
4. Rise of India in global beef trade is a very important factor. Global demand for beef is expected to increase in the nearest decade due to increase in earning and popularity of diets on emerging markets. As far as the USA is striving expand to non-traditional markets of the Middle East, Africa, and South-East Asia, it will face tough competition of cheap and sometimes socially preferred Indian beef.
Conclusion: changes in global supplies of beef will have considerable consequences for trade flows in the nearest years. Australia and Brazil are expanding their heard, which presupposes higher competition for American beef, especially on profitable Asian markets. Speaking about importers of American beef, they see that supply keeps falling, and it is highly unlikely that the rising pressure on beef prices will change the trend in 2014; in fact, it may become more intense.
Regular market survey, held by Dow Jones analysts, shows that the total volume of stocks is expected to drop by 7.3% in comparison to last year. As a rule, the analysts’ predictions are close to USDA reports, but there may be some deviations.
Last week’s events: last week there was a hurricane in North Dakota. Several households have been harmed. The element has destroyed 60-70 thousands of heads, which is equal to the number of weekly slaughter in the USA. This event seems to have little impact on the industry in general; however, taking into consideration the general shortage of heads, even such number is high.
Seasonal patterns: historical charts show that till the end of October the price is more likely to fall.
