The US beef industry is entering 2021 with a near-record number of cattle on feed and marketings below a year ago, indicating a large amount of meat coming to market in the first quarter to pressure prices, said Elliott Dennis, livestock Extension economist at the University of Nebraska/Lincoln, in a letter to Extension Agents.
Historically, beef export sales decline in the first quarter, Dennis said. Since 2002, 2020 was the only time Q1 export sales were higher.
DOMESTIC MARKET NEEDS TO STEP UP
The domestic market likely needs to take the lead in working through Q1 wholesale meat supplies, he said. But the market’s ability to do so could be hindered by unexpected events.
A positive is that the US/JPN, US/KOR, US/CHN and USMCA trade deals are in place, Dennis said. Whether round 2 of the US/CHN trade deal occurs and whether China imports already committed beef is more uncertain given the coming change in presidency.
2021 EXPORT MARKETING ISSUES
One way to monitor beef exports is through the USDA’s Weekly Export Sales Report, which shows the number of exports, cumulative yearly exports, unshipped sales, cancelled sales and sales scheduled to ship in future marketing years, Dennis said.
Ten countries account for 96% of all beef exports, he said. Japan and Korea have nearly 60%, and the People’s Republic of China and Hong Kong have abnormally large outstanding sales, about 35% of total commitments.
SEASONAL PATTERNS
When packers closed for COVID issues, there were a large number of slaughter-ready cattle, he said.
The closures caused a shortage of beef, raising prices, he said. Beef prices continued to rise with increased consumer retail purchases and the difficulty in repurposing meat destined for food service.
Combined, those events lowered export sales by about 40% in May and June compared with the 10-year average, Dennis said. The beef market eventually sorted through the supply and demand issues, prices and export sales.
At the end of 2020, beef export commitments were the largest ever and actual exports were the second-largest behind 2018, he said.
Comparing the case of BSE in December 2003 to COVID-19 shows how quickly the export market normalized to the pandemic, Dennis said. In Q1 2004, export sales were near zero as countries implemented trade restrictions. As more information emerged about the severity and spread of BSE, export sales increased.
Beef export sales did not reach pre-BSE levels for 15 years, he said. In 2020, export sales only dipped in May and June and then rebounded. All remaining months in 2020 were within one standard deviation of the 10-year average.
CATTLE, BEEF RECAP
Fed cattle trading was reported in the Plains this week at $111 to $112, steady with last week. Dressed-basis trading was reported at $176 to $177 per cwt, steady to up $1.
The USDA choice cutout Thursday was up $0.54 per cwt at $205.81, while select was up $0.51 at $196.59. The choice/select spread widened to $9.22 from $9.19 with 134 loads of fabricated product and 42 loads of trimmings and grinds sold into the spot market.
The USDA reported Thursday that basis bids for corn from livestock feeding operations in the Southern Plains were down $0.03 to up $0.04 at $1.18 to $1.25 a bushel over the Mar CBOT futures contract, which settled at $4.94 a bushel, down $0.01.
The CME Feeder Cattle Index for the seven days ended Wednesday was $135.35 per cwt, up $0.43. This compares with Thursday’s Jan contract settlement of $136.70 per cwt, up $0.92.