Copper, Cattle and Crude Climb

Inclement weather in the Central Plains caused cattle prices to increase for a third straight week. Cattle in cold, wet weather lose fat while using energy to combat the cold, requiring more food to produce meat. Indeed many cattlemen are holding off on placing cattle into feedlots in the first place, hoping that sloppy pen conditions will improve. It is estimated that average slaughter weights are down some 50 pounds since the first of October. Cattle prices are up 4 cents in the past 3 weeks. Friday saw April cattle trading up to 93.47 cents per pound -- a level not seen since November of 2008.

Copper prices climbed to a three-week high after reports indicated strong economic growth in Asia and a healthy increase in U.S. housing starts. A report released Monday showed Japan's third-quarter GDP had increased to 1.3%. Japan is the world's fourth-largest consumer of the industrial metal. It is predicted that China, the world's largest consumer of copper, will see a blistering 10-12% increase in the size of its economy in 2010. Closer to home, housing starts in the U.S. rose 2.8% from December, according to the Commerce Department. As of Friday afternoon, March copper was trading at $3.35 per pound -- up 17% from lows made early this month.

Crude prices were up $5.00 per barrel on the week - an increase of more than 6%. Middle Eastern geopolitical concerns and a more-optimistic outlook for global economic growth were cited as reasons for crude's rally. Investors decided these positive factors outweighed various negative factors including a Department of Energy report reflecting higher than expected crude supplies, a stronger dollar, and news that China had taken measures to slow the pace of its economic growth. Whether or not the surprise hike in the US discount rate by the Fed would significantly alter crude's upward trajectory was an open question as of Friday afternoon, with the April contract hovering around $80.00 per barrel.