It has been a quiet week in cattle markets. Most auction markets are closed between Christmas and New Year’s, and it looks like all the fed cattle buyers took the week off too. I suppose everyone has COVID fatigue. But now that we have a vaccine available, we can see some light at the end of the tunnel.
The big question is: When are you going to get vaccinated? I haven’t seen any effort towards a mass inoculation, like a drive-through shot in the arm. But government is involved, and President Donald Trump has already been relegated to the backseat so it will be a while.
Politically, it’s going to be an interesting four years. The two Senate races in Georgia hold the balance of the country in their hands and Georgia always seems to be in the news about elections.
Regardless of what happens in Georgia, we have an administration that is all about climate change. It already seems like it will be Obama-Biden 3.0 with all the folks they brought back into cabinet positions. You must admit Trump was pretty good to the ag community and the energy guys. I for one will miss him, but I don’t think for a second that he is going to fade off into the sunset like George Bush did.
It’s looking like the whole world will be focused on China after the Hong Kong incident and the constant pressure they place on Taiwan. They have shown they really do want to rule the world. It will be interesting how the Biden administration chooses to treat them.
China has been a good customer to U.S. agriculture this year. Their beef imports are up something like 350 percent over last year and they are now our seventh largest beef customer. And they have driven up the price of corn and soybeans to levels not seen since the last big drought.
China is rebuilding their hog herd and needs lots of feed grains. High grain prices are great for farmers who usually operate at parity, but it can be a little tough on livestock producers. I’m surprised that China hasn’t come up with a vaccine for African swine fever, the disease took out over half of their hog herd.
Rarely do you see feeder cattle and corn prices go up at the same time, like they were the past couple weeks. Now feeder cattle are in a full reversal on the board. Looking into 2021, it looks like we may have some dramatic price shifts for many ag commodities. Corn futures are over $4.60 a bushel, which is a welcome sight for corn farmers. Some analysts are thinking it will go over $5.
Now that corn has shot up to a new level, traders are trying to bring feeder cattle down. Market analysts have been forecasting the high end of fed cattle values at around $124 for this next year. But with feed costs rising, something’s got to give. The last cost of gain measurement I’ve seen was 93 cents a pound of gain on fed cattle and that was when corn was $4.20. Feeding cattle will cost a lot more going forward and cattle feeders will have to take it out on the cow-calf guys.
An article in “Successful Farming” by Chuck Abbot says, “China is buying huge amounts of U.S. corn as it rebuilds its hog herd and recovers from the pandemic, but its appetite for imports could weaken by next fall, when U.S. farmers are expected to harvest their second-largest crop ever, said University of Illinois economists last month. Chinese imports of 13 million tons this year could taper to a still large 10.5 million tons during the sales year that begins on Sept. 1.
“‘China will import grain when it needs grain and when the market dictates,’ said Economist Joe Janzen. At the moment, imported corn costs less than domestically grown corn in China. The USDA estimates China will import 13 million tons of corn this marketing year, double last year’s amount. Some 11 million tons of U.S. corn have been sold for shipment to China since Sept 1.”
Obviously, China needs feedstuffs, with 1.4 billion mouths to feed, and to keep their population happy. This is a big job for the Communist Party of China. Politics always plays a role in trade between China and any other country. And right now, I don’t think they like us much but then the rest of the world isn’t liking China much either.
Higher feed costs are in order for 2021, and then the old saying goes, “High-priced feed makes for high-priced cattle.” And pray for spring rains. — PETE CROW
