Cattle farmers could see better pricing opportunities in the year ahead after weathering a number of challenges in 2020.
USDA’s latest cattle on feed estimates released Friday point toward a tightening supply of animals by summer, which could create some eventual fireworks in the market.
Placements in feedlots during November totaled 1.91 million head, down 9% compared to the same time last year.
“Overall, today’s numbers confirm the trade’s general expectation of moderately positive news,” Rich Nelson, director of research at Allendale Inc, told FarmWeek.
“November placements supply the mid-summer period, as well as early fall, and (the estimate) came in 8.9% under last year,” he noted. “When you combine that with the fact that October placements were down almost 11%, it looks like we’ll have a tight supply in the summer period. It also coincides with a period of a shorter supply of hogs lined up as well.”
Authors of the CME Group’s Daily Livestock Report noted the number of cattle marketed in April and May of 2021 could be higher than 2020, after COVID-related slowdowns at plants backed up the supply of animals this past spring, but the number of cattle on feed ready to be slaughtered may be below the 2020 numbers.
The April live cattle futures contract closed Tuesday at $117 per hundredweight, compared to the monthly weighted average for live steers in April 2020 of just $102.
However, a short-term bottom in the market remained in place as of Friday, but Nelson looks for a slight recovery in January from around $108 to possibly $111-$112 per hundredweight.
“Overall, the message in the cattle market is we have well supplied numbers going into the first quarter,” he said. “But, the market is rebounding from what is perceived to be too low wholesale beef and cash cattle prices. Now, we’re looking at the idea in the second half of next year that we might see some pretty strong prices in the cattle market.”
Overall, the inventory of cattle and calves on feed for the slaughter market totaled 12.036 million head as of Dec. 1, up slightly from 12.031 million head on the same date last year.
Bob Chudy, of Chudy Meat Consulting, also provided an optimistic outlook for next year during a webinar hosted by Barchart.
“The clear challenge is the pandemic, which affected pricing,” Chudy said. “Because of reduced (packing) plant capacity back in the spring and early summer, we stockpiled animals we’re still working through, which ought to continue into the first quarter.
“But, by the second half of (next) year, hopefully we’re coming out of the pandemic, which ought to lead to better demand, and the backlog of cattle should be gone,” he added. “There’s definitely some upside to pricing the second half of 2021.”
Marketings of fed cattle totaled 1.78 million head in November, down 2% from last year.