Several factors will shape cattle markets for the first few months of 2021 at least, providing a mix of opportunities and challenges, said Derrell Peel, Oklahoma State University Extension livestock marketing specialist, in a letter to Extension agents called Cow/Calf Corner.
Strong beef demand and tightening cattle supplies provide cautious optimism for cattle markets, Peel said. Higher feed prices and continuing drought threaten individual producers and perhaps overall market conditions.
Consumer demand will be supported by additional federal stimulus for a time but continuing macroeconomic challenges will persist, he said. The continuing pandemic and the time needed for vaccine implementation suggest that much of the promise of 2021 may be pushed into the second half. In the meantime, uncertainty and volatility may remain elevated.
PANDEMIC TO GET WORSE
The US likely will face its worst pandemic conditions in the next few months, Peel said. This means a continuation of limited food service and more challenges in food product markets.
Boxed beef prices at the end of 2020 were nearly equal to a year earlier, but this obscures a continuing variation in food service and retail grocery product demands, he said. Primal chuck and round prices were higher along with ribs, while loins were down. Food-service dependent products remain noticeably affected by limited demand, and challenges to food supply chains will continue.
FEED PRICES UP
Grain and oilseed prices are significantly higher than a year ago, Peel said. Average December cash corn prices were up about 22%, with sorghum up more than 50%; wheat up about 30%, and soybeans up 35%. December dried distillers grains were roughly 39% more than the end of 2019. These higher ration costs will change feedlot demand for the type and size of preferred feeder cattle.
At the end of 2020, 41% of the US was experiencing some degree of drought, mostly in the western half of the country, he said. This level of drought is concerning and may have significant effects rather quickly in 2021 should it persist.
Hay supplies appear adequate with a slight reduction in 2020 production offset by larger beginning stocks, Peel said. Late 2020 prices were slightly lower and were projected to average lower in 2021, reflecting expectations of less demand as cattle numbers decline.
CATTLE PRICES STRUGGLE
Cattle prices struggled through much of 2020 but ended with some momentum, Peel said. Oklahoma calf prices were close to year earlier and increased nearly 20% from lows earlier in the fall. Prices for heavier feeder cattle remained about 7% lower but similarly increased roughly 13% from fall lows.
Fed cattle prices finished the year with strength that represented a roughly 18% increase from summer lows but were more than 8% lower year over year, he said.
CATTLE, BEEF RECAP
Fed cattle trading was reported in the Plains last week at $111 to $112 per cwt up $1 to $2 from the previous week. Dressed-basis trading was reported at $176 per cwt, up $4.
The USDA choice cutout Monday was down $0.08 per cwt at $209.87, while select was up $0.88 at $196.53. The choice/select spread narrowed to $13.34 from $14.30 with 80 loads of fabricated product and 22 loads of trimmings and grinds sold into the spot market.
The USDA reported Monday that basis bids for corn from livestock feeding operations in the Southern Plains were unchanged at $1.21 a bushel over the Mar CBOT futures contract, which settled at $4.83 3/4 a bushel, down $0.00 1/4.
The CME Feeder Cattle Index for the seven days ended Friday was $136.55 per cwt, down $2.22. This compares with Friday’s Jan contract settlement of $134.95 per cwt, down $4.00.