Fundamental Stats -

The discovery of mad cow disease in the U.S. at the end of 2003, hurt U.S. beef demand, but world demand continues to rise. Unfortunately, because the U.S. beef industry has been unable to deliver a consistent, quality product, it has been hard to restore international consumer confidence. On August 12, 2008, the USDA projected that 2008 U.S. beef production will be up 1% to 26.7 billion pounds and so far, production is up 1.4% from a year ago. The USDA increased its estimate of the 2008 average steer price from 92.5 to 94.0 cents per pound. For 2009, they have a price estimate of 96.0 cents.

The August 1st cattle on-feed inventory was 9.869 million head, down 4.2% from last year and less than expected. July placements were up 2% and marketings were up 1% from a year ago. As of July 1, 2008, the U.S. cattle and calf inventory totalled 104.3 million head, down .5% from a year ago.

Fundamental Stats -

Early in 2007, there was hope that hog producers would restrain production due to fear that the ethanol market was going to make it hard to obtain enough corn for feed. Corn prices went up, but hog producers did not cut back production. In 2008, the USDA expects pork production to increase 7.4%, on top of a 4% increase in 2007. So far in 2008, U.S. pork production is up 8.7% from a year ago. On the positive side, U.S. pork exports were up 39% in the first quarter from a year ago. On August 12th, the USDA increased its 2008 price estimate for barrows and gilts from 47.0 to 48.5 cents per pound (65.5 cents lean). In 2009, the price estimate goes up to 53.5 cents (72.3 cents lean).

The June 1st count of all U.S. hogs and pigs was 67.66 million head, up 5.8% from a year ago and more than expected. The March to May pig crop was up 4% from a year ago. Frozen pork inventory as of July 31, 2008, was 492 million pounds, up 8% from a year ago. Frozen bellies totalled 59 million pounds, up 87% from a year ago.

Fundamental Stats -

After five years of court battles and disputes, the U.S. and Canada formed a new softwood lumber trade agreement on September 12, 2006 that is supposed to last for at least seven years. Roughly one-third of all U.S. lumber comes from Canada and so it is a relief to see the legal battle end (at least for now).

Lumber prices have been falling since early 2006 as the U.S. housing market deteriorated. On August 9, 2007, the sub-prime mortgage problem turned into an international credit crunch, forcing central banks to add liquidity and tighten credit standards for new mortgages. The result is that 2007 was a poor year for lumber prices, but the excessive pessimism may set up a better scenario in 2008.

In the big picture, the forest products industry has not been profitable and many traditional lumber companies have been selling their timber land and moving toward consumer products. Current lumber supplies are said to be plentiful while the market hopes for a change in demand. The U.S. Forest Service said that U.S. sawmills shipped 114 million board feet of lumber in the first quarter of 2008, down from 135 million board feet per day in 2007. In 2008, housing starts as of July were down 30% from a year ago and new home sales were down 36% from a year ago. In 2007, housing starts were down 25% after dropping 13% in 2006. 2007 new home sales were down 26% after falling 17% in 2006.