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Column: Deluge of crude oil continues

Breitinger

U.S. crude oil supplies are continuing to swell, reaching nearly 400 million barrels last week, the highest level since 1931. Oil supplies are rising even as refineries are running near full speed, pumping out large volumes of gasoline and diesel fuel

As the market assessed the rising energy supplies during the last few weeks, crude oil prices have fallen more than $4 per barrel to a five-week low, which helped pull gasoline and diesel fuel prices lower by as much as a dime per gallon as well.

Despite the titanic U.S. supply of crude, global prices continue to hover near $100 per barrel because of ongoing supply threats. Unrest in Syria and Iraq, rising tensions between China and its neighbors about disputed territories, and the persistent threat of escalating conflict between Russia and Ukraine all threaten to interrupt the global flow of crude oil, which is helping to keep prices high.

As of midday Friday, crude oil for delivery in June was trading at $99.91 per barrel.

Young cattle prices higher

Cattle prices have been rising rapidly as the U.S. supply remains constrained.

The beef industry is still struggling through a multi-year drought in Western states that has destroyed pastureland, making it difficult to grow the national herd.

The relative shortage of animals is causing many ranchers to hold onto animals for the purpose of breeding, which further limits the market-ready cattle in the near term.

Most dramatically, the market for young cattle, known as “feeder cattle” in the industry, has been especially strong, with prices up 40 percent during the last year.

Feeder cattle are typically year-old steers or heifers that are ready to be moved into a feedlot, where they are fattened on corn until they approximately double in weight.

The market for May feeder cattle reached an all-time record high again on Friday, trading at more than $1.84 per pound.

Despite the shockingly high prices, there is still strong demand for feeders, since corn prices are still relatively cheap and the market for market-ready, or “fat” cattle, is exceptionally high. This price differential allows feedlot operators to continue to profitably buy feeder cattle, feed them corn and then sell the fattened animals a few months later.

Walt Breitinger is a commodity futures broker in Valparaiso. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.

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