Slime Controversy Maims Cattle Market

Cattle prices fell sharply this week as headlines appeared regarding a ground beef additive dubbed "pink slime." The substance, known in the beef industry as lean finely textured beef (LFTB), is made from leftover trimmings. Trimmings are liquefied, treated, and added to ground beef. Although the USDA stands behind the process as a safe, low-cost way to make less-fatty ground beef, public outcry has focused on the unsavory production process, which includes intestinal material being treated with ammonia.

As the story gained traction with the public, traders sold their cattle positions, sensing that the short-term demand for beef could drop off. This pushed live cattle prices to the lowest price since December, sliding under $1.21 per pound on Friday.

Industry experts calculated that if supermarkets were to exclude LFTB ground beef from their shelves, an additional 1.5 million cattle would have to be slaughtered annually in order to make up for the loss of the additive. Therefore, some analysts warn that taking LFTB off the market could result in higher beef prices in the future.

Corn Steals Acres from Beans

A USDA report released early Friday morning confirmed the market's suspicions that farmers would plant more corn and fewer soybeans this year. Across the Midwest, the onset of spring weather requires farmers to make final planting selections. The decision-making process is complex, employing a matrix of factors to predict future profitability, including current prices, weather forecasts, fertilizer costs, and data provided by the federal government.

Friday's USDA report projected an increase of nearly four million acres of corn acreage across the United States this spring, while soybean acreage fell by over one million acres. The 95.8 million acres of corn expected to be planted this spring would be the highest acreage since 1937.

Overall, the report suggested that grain supplies could remain limited for the coming year, pushing corn and soybeans sharply higher. As of midday Friday, soybeans for May delivery were trading 55 cents higher at $14.11 per bushel (+3.9 percent) and May corn was "limit up," rising the maximum 40 cents to $6.44 (+6.2 percent).

Natural Gas Deflates Again

Natural gas prices continued to plunge this week, falling to a new ten-year low at $2.11 per million British thermal units on Friday. This week's drop was precipitated by a sharp increase in national storage inventories. Natural gas production is currently at an all-time high, rising nine percent over the last year. The market was also disappointed by an energy policy speech from President Obama on Thursday, where he focused on shifting U.S. energy policy away from petroleum toward renewable fuels without significant discussion of using natural gas in the interim.