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Storms stressing cattle, creating smaller supply

7:24 PM, Mar. 2, 2013  |  Comments
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Cattle weights clipped by storms

Severe winter storms continued this week across the Great Plains, with cold weather expected to slash animal weights. Severe weather can stress cattle, causing them to eat less and lose weight; some reports released showed animals as much as 100 pounds lighter due to the storms. This reduction in weights translated to a smaller supply of cattle and helped to push prices higher.

Meanwhile, Washington remained deadlocked on the issue of budget cuts, which is expected to lead to "rolling furloughs" for U.S.D.A. meat inspectors, potentially shuttering meatpacking plants. Although the precise impact is still unknown, analysts expect that the reduction in meat inspectors will curb beef production and demand for cattle, limiting the price gains for live cattle, while increasing the price for beef at the grocery store.

During the week, the "bullish" factors outweighed the sequestration concerns, pulling prices as much as 2.3 cents per pound (+1.9 percent) higher. By midday Friday, live cattle for April delivery were worth $1.305, the highest price in two weeks.

Gasoline falls

Gasoline prices tumbled this week as refinery capacity rose, bringing increased supplies of the fuel onto the market in the near futures. Refineries frequently shut down during late winter for seasonal maintenance, but this year's closures were larger than expected, curtailing the short-term supply of gasoline. Market participants are seeing this week's increase in refinery activity as a sign that gasoline and diesel fuel shortages will soon be over, sending prices spiraling downward.

April gasoline futures collapsed by more than 20 cents per gallon this week, falling 6.1 percent. Wholesale gasoline for delivery in April, which represents the price of fuel without taxes or other fees, was worth $3.06 on Friday morning, the lowest price in over a month.

Natural gas to remain plentiful

Early this week, the University of Texas published a study indicating that the supply of natural gas in the future may be much larger than had been anticipated. Just five years ago, there was widespread concern the world was running out of natural gas, but new technologies and discoveries have changed the outlook.

As a result of the growing supply of natural gas in the U.S., prices remain relatively low, trading Friday for $3.47 per million British thermal units.

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