Demand Impacting Cattle Markets Much More Than Supply
Day 1 at NCBA Convention 020620
USDA’s Cattle Report shows the expansion stage is coming to an end. It would normally be good news for prices. However, there are more factors than basic supply and demand at play.
The total inventory as of January 1 is 94.4 million head, down slightly from 94.8 million head a year ago. It’s not a surprise to industry.
“The herd expansion historically lasts five to six years,” says Jeff French of Top Third Ag Marketing. “We are in the fifth- to sixth-year of the expansion.”
Analysts credit part of the dip due to lack of forage in places such as the Southern Plains, flooding in the Midwest and blizzards in the Northern Plains.
“There probably wasn’t as good of a breed back from cows,” says Chase Dewitz, a North Dakota cattle producer. “There are probably [producers] that slaughtered cows which lost their calf instead of running the cow without a calf.”
Despite bullish report, the livestock markets currently impacted by the news of the coronavirus.
“We are concerned it will probably delay the impact of these trade flows we’ve been so excited about the last couple of months,” says Will Sawyer, an economist with CoBank. “We think the coronavirus will have a significant impact, not just to the Chinese economic growth but Asia economic growth.”
“We’ll run generally in the $1.20s in the first quarter,” says John Nalivka, president and owner of Sterling Marketing. “I think we have the opportunity to get up probably higher than $1.30 as we get into April [in the fat cattle market]. As we go in to the fall, we have the opportunity to be back hovering around the $1.20 to the $1.25 range again.”
“It’s acting seasonal where we have a pull-back right here with the potential of a spring rally,” says Casey Mabry a risk advisor with Blue Reef Agri-Marketing. “I think the summer months and in the fall, giving no black swan event like the Tyson fire last year, prices should be pretty decent.”
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