Record prices set, record prices needed

At a time when America’s unemployment is slowly trending lower, recent news from the commodity markets suggests our economic recovery could slow to a crawl - or stall out completely.

Nearby corn futures closed at $7.60 on Monday, up nearly a quarter per bushel. Crude oil also moved higher to $108.29 per barrel. April Live cattle closed up 30 cents, with June down 35. Lean hogs were down slightly.

The Labor Department announced Friday the U.S. unemployment rate fell in March to 8.8 percent, which indicated the U.S. economy created a better-than-expected 216,000 jobs. The February unemployment rate was 8.9 percent. Labor Department data suggests the U.S. economy has created 670,000 jobs in the past six months.

More people working should indicate increasing consumer spending power for foods such as beef and pork. Yet analysts are justifiably concerned that food prices are increasing at rates much faster than consumer buying power. Throw in the fact that gasoline prices continue spiking higher and you have legitimate concerns the bull market for commodities may not be sustainable.

Cattle feeders are especially wary. On one hand they sold fed cattle at record prices last week in the $121 - $123 per hundredweight range. On the other hand they’re looking at replacement feeders costing over $1,000 per head, and corn prices over $7 per bushel and headed toward $8. That would put breakevens in the range of $130 to $135 for cattle placed this week.

In other words, those cattle would not only need record-high prices to break even in four or five months, they would need prices to be at least $10 per hundredweight higher than the present record.

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