Mad Dash Lower for Cattle

The cattle market was rocked this week by an announcement that the USDA had discovered a case of bovine spongiform encephalopathy, commonly known as mad cow disease. The infected cow was found in California, and was the first known occurrence of the disease in the United States since 2006. The discovery of the diseased animal on Tuesday caused cattle prices to fall three cents per pound -- the exchange-limited amount.

Much of the panicked selling was linked to fears that consumer demand could drop off due to fears linked to the disease. Even worse, some industry experts warned that foreign buyers, like Japan and South Korea, might ban U.S. beef, as they did following the initial discovery of mad cow disease in 2003. Over 10% of U.S. beef is currently exported, making foreign demand an important component in the cattle market.

In the hours after the initial report, it became clear that the diseased animal did not enter the food supply. Furthermore, few foreign buyers have restricted U.S. beef so far, indicating that this instance might not severely hamper the U.S. exports.

Despite this reassurance from customers abroad, uncertainty continued to linger into Friday's trading session. As of Friday morning, cattle futures for June delivery were trading at $1.12 per pound, down 3.5 cents this week.

Soybeans Shoot Higher

Soybean prices extended their four-month rally this week, reaching the highest price since the summer of 2008. Rising over fifty cents per bushel this week alone (+3.7 %), soybeans have been propelled higher by continued concerns that South American soybean production would fall short of previous estimates.

Persistent drought conditions and freezing weather during the end of the Argentinean growing season have increased fears that the crop will be smaller than expected. Typically, China purchases a significant portion of their soybeans from South American countries, but supply problems there have forced the Chinese to continue buying large quantities of U.S. beans, driving our domestic price higher. Chinese demand is primarily fueled by their hog industry, which needs protein-rich soybean meal to feed its nearly 700 million pigs.

As of midday Friday, soybeans for delivery in May were worth $15.00 per bushel, up 23 percent this year.