Lower Stocks Raise Concerns About US Economic Health

4-11-14 – US economic strength is being questioned as the stock market continues to fade in what could be a major turn from the bull market of the last four years.  Market analysts and investors have been worried that the run would end, although some say a 10% setback would be healthy and is, in fact, overdue.\r\n\r\n   Stock market indexes fell hard Thursday in spite of the best weekly jobless claims number since 2007, and thus has traders worried about further losses.\r\n\r\n   US stock futures are holding near steady overnight, despite a slump in European and Asian markets on valuation concerns.  Investors are bracing for weaker corporate earnings after a brutal winter as “earnings season” kicks off today with JP Morgan and Wells Fargo.\r\n\r\n \r\n\r\nMONEY CRISIS THREATENS UKRAINE\r\n\r\n \r\n\r\n   National coffers in Ukraine and Russia are drained, and the situation is playing out in Ukraine.  The lack of money is threatening the Russian economy, and the government is drubbing Ukraine for payment of its bills for natural gas.\r\n\r\n   But Ukraine doesn’t have any money either, despite International Monetary Fund loans and loan promises.\r\n\r\n   Russia has threatened to shut off natural gas supplies to Ukraine for non-payment, and Ukraine has threatened to turn off the spigots to Russian gas pipelines that cross Ukraine on their way to western Europe.\r\n\r\n   Destabilizing these economies at the start of the growing season could support new-crop grain and soybean futures prices on the theory that inputs will be hampered and production cut.\r\n\r\n \r\n\r\nJAPAN OFFERS BEEF TARIFF CUT, US MAY AGREE\r\n\r\n \r\n\r\n   In the wake of a long-term trade agreement with Australia that cuts beef tariffs in half to 19.5% over a 10-year period, the US may be willing to accept Japan’s offer of a big cut in tariffs rather than insist on dropping the levy altogether.  There are rumors that Japan is offering to cut US tariffs to 10% from the current 38.5% of value.\r\n\r\n   Reports say government officials are trying to sew up an agreement and have it ready for US President Barack Obama and Japanese Prime Minister Shinzo Abe to sign when the President visits Japan April 24-25.\r\n\r\n   Such an agreement could boost US beef exports to Japan and retain US market share that threatened to be lost to Australia, but Japan reportedly wants to impose trigger quotas that would reinstate the higher tariffs if current import levels are exceeded, something US negotiators likely will balk at.\r\n\r\n \r\n\r\nCASH CATTLE UNTRADED\r\n\r\n \r\n\r\n   Cash cattle markets in the Plains were untraded through Thursday, although bids were reissued at $146 on a live basis with a few in Nebraska at $147, down $2 to $3 from last week.\r\n\r\n   Many futures traders expect steady to lower cash prices this week.  Futures prices are up, however, after a sharp selloff last Friday likely was overdone.  Now, as expiration approaches April 30, April is closing the gap with a weaker cash cattle market.\r\n\r\n   Long-term cattle markets may be affected by a report from Oklahoma State University Extension Livestock Market Specialist Derrell Peel who says a late spring and lingering drought in Plains and western states are cause for concerns about the US herd being rebuilt.\r\n\r\n   The USDA reported its choice beef cutout value Thursday at $225.00 per cwt, down $0.46, and select at $214.30, down $0.93.  Reports say middle meats are not moving as well as the end cuts as the grilling season gets delayed by unfavorable weather.\r\n\r\n   Week-to-date slaughter at 460,000 head, compared with 467,000 last week and 481,000 last year.\r\n\r\n   The CME Feeder Cattle Index for the seven days ended Wednesday was $178.31, down $0.43, while the April futures contract settled Thursday at $178.27, down $0.60.\r\n\r\n \r\n\r\nIN OUR OPINION\r\n\r\n \r\n\r\n–PEDv is gaining more widespread national headlines.  This likely will bolster consumer acceptance of higher pork prices and spill over to beef.  Bacon already is above $4.00 a pound in some locations.\r\n\r\n–Corn and soybeans having a hard time holding recent gains despite what should have been a bullish WASDE report – likely a bearish indicator.\r\n\r\n–Hay prices are rising as drought cuts into forage availability\r\n\r\n