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Impressive cattle rally

Getty/iStockphoto/Jackie Nix Line of black Angus cattle looking at the camera with blank blue sky
Cattle futures surge to summer price highs, outlook remains positive through New Year.

Cattle futures have been on a nice run higher since early October. The December contract had a price low of $125.00 back on Oct. 1, 2021 with prices closing at $137.90 the day before Thanksgiving. Quite impressive as prices are now back at summer highs.

Where to from here?

With the price surge this week, a correction in the overbought marketplace seems likely in the days ahead. While there may be some temporary setbacks, and price zigs and zags along the way, the outlook for cattle prices into December looks good. Beef demand will be strong as parties are back in full swing, cash in people’s pockets, and consumers have a desire to indulge this Holiday season as the shackles of Covid are loosened.

Demand is strong

I have argued for some time that cattle futures were undervalued. Other economists were suggesting that consumers would not want to buy higher priced beef at the grocery store with higher gas prices and higher grocery prices overall. I pointed out how back in 2013-14 I shared that same sentiment – only to be wrong for 6 months.

Back then we had $100 crude oil and $150-$170 cattle futures. I thought the consumer would waive the white flag and surrender to their budget, to make tuna noodle casserole instead. I was wrong. The consumer kept buying at the store because there is NO substitute for beef.

The butchers at the deli got clever and cut the slices of steak a little thinner in efforts to keep the sticker shock down for the customer. For now domestic demand is strong as Americans dine out at restaurants and celebrate this Holiday season in style!

Export demand is also strong

U.S. beef export sales for the week ending Nov. 11 came in at 25,463 tons for 2021 and 4,596 for 2022, for a total of 30,059. Cumulative sales for 2021 have reached 1.002 million tons, up from 872,400 in 2020 and the highest on record! The 5-year average is 796,600. China, Japan, South Korea and Taiwan have been large buyers this year. 

Meatpackers have been selling serious amounts of U.S. beef to China ever since China halted purchases from Brazil in early September due to the detection of two cases of mad-cow disease. Before the ban, Brazil was the main beef supplier to China.

Supplies are down from year ago levels

The most recent cattle on feed report continues to show that overall, the U.S. cattle herd is down from year ago levels. The on-feed number as of Nov. 1 came in at 99.8%, which was the exact average trade expectation. Feedlot placements in October were 2.245 million head, 102.4% of last year.  Marketings in October were 1.788 million head, 95.5% of one year which was slightly down on trade expectations for 96.3%.

With tighter supplies and strong domestic and global demand, the outlook for cattle prices remains friendly until the New Year.

Reach Naomi Blohm: 800-334-9779 Twitter: @naomiblohm and naomi@totalfarmmarketing.com.

Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

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