It’s looking like the cattle markets have nearly shut down for the rest of the year through last Wednesday. Only 30,000 head of negotiated cash cattle traded hands last week at lower money—$105, $165 dressed. Packers seem to have plenty of cattle around them and aren’t eager to add supplies until we get past the New Year.
I would say, if you don’t need to sell them, don’t. Make the packer come to you and set a higher price. If you’re a cash fed cattle seller, it must be frustrating to see the premiums these formula grid traders are receiving today; 26,800 head were priced last Wednesday at $179.44 weighing 886 lbs., and of course these are high-grading cattle.
The Cattle on Feed report is expected to show placements down. The average guess is 91.8 percent for November placements. This is two straight months of subpar placements, and there is starting to be a lot of speculation about where the feeder cattle are. Calves were so cheap for a while that I would imagine some producers are hanging onto them for early January sales. Typically, early January sees a bit of a rally on calves, and good luck finding any yearlings this time of the year.
There will be fewer cattle next year. The consensus on the Jan. 31 Cattle Inventory report is down 1 percent. The beef industry has started the downhill run in the cattle cycle. But you wouldn’t know it if you have been watching some of these purebred production sales. For instance, Sitz Angus in Harrison, MT, sold 422 2-year-old bulls and averaged $7,781, and 343 commercial bred heifers averaged $2,283. Now realize these heifers are ultra-sounded into two-week calving periods and some lots were bred AI and sexed.
It appears that most cattle industry analysts are optimistic about the cattle business going forward and see better prices. I’m sure that many of you were disappointed selling calves on the fall market. Depressed prices always force cattlemen to wait a bit longer, and in these volatile markets waiting a few more weeks can make big difference.
The folks at the Cattle Report have been trying to figure out the volatility in this market, and said, “This week’s Cattle on Feed report will confirm lower placements for the past two months. Cattle numbers and feed cost are front and center for livestock production. Many question whether this is the beginning of shorter supplies of stocker and feeder cattle or cattle owners holding off on sales until after year’s end or the large feeding companies letting their numbers drop.
“Grow yard numbers are higher and wheat field grazing numbers are lower. The proforma for cattle placed on feed currently would suggest there are better options for investment than cattle feeding. The new year will likely bring replacement costs, feed cost and fed prices more in line with the current price relationships. Futures traders see an opportunity for a reverse crush.
Weather always plays a large role in calf prices and the plains is forecast for a mid-winter warm up. This temperature expectation will create good demand for calves from wheat field operators who will see some growth on their pastures and other operators who will want to begin purchasing for next summer’s grass pastures. A smaller calf crop will keep competition keen for winter offerings.
“Stocker operators are now looking at the same squeeze currently underway in the nation’s feedlots. Calf prices are too high in relationship to next year’s CME feeder cattle prices. New calf purchase prices seem to be ignoring the decline in next year’s feeder board. The cost to make a new purchase, process the cattle, absorb the death loss, pay the medicine cost, labor to look after the cattle, add in the supplemental feed and interest, would result in an outcome that frighten any banker.”
It sounds like it’s time to be cautiously optimistic going forward and we all know that Mother Nature has the final say in the cattle business. It will be good to get over the year of the COVID-19 virus and get into a new year that will be focused on mending this economy.
One thing to be happy about is we have had outstanding beef demand despite the hospitality business’ absence. This demand has created a good opportunity to do some direct marketing of your beeves, if you can find someone to process them. I’m looking forward to a good 2021 because it can’t be worse than the year we are leaving. — PETE CROW
