Farm Progress is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Serving: United States

Mixed signals for cattle futures

DarcyMaulsby-iStock-GettyImagesPlus Cows grazing corn stalks
Heavy cattle are coming to market, yet unexpected demand, boosted by vaccine hopes, may win the day.

Cattle futures lost over $10.00 in early October due to ample beef production and continued COVID-19 lockdown measures across the country, which diminished restaurant demand for beef.  

In late October prices found a burst of fundamental and technical support, leading to a two-week price surge resulting in a $10.00 recovery in futures prices.

At the moment, December live cattle futures are near the $113.00 price point, and back near the price highs the futures market saw back in early August and late September. Cash trade is quiet so far on the week, but beef prices are on the rise. In fact, Choice beef has risen over $12/cwt. in one week alone, and traditionally futures prices have a seasonal window, suggesting prices should work higher into December. 

Beef production

Overall, U.S. beef production is large; slaughter numbers are current and weights are high. The recent average dressed steer weight for the week ending October 24 was 931 pounds, which is up from 906 pounds the year prior. Clearly heavy cattle are coming to market, which simply equates to larger beef production. In a recent USDA report, the USDA pegged third quarter beef production up 5 million pounds with fourth quarter expected to be up 80 million pounds. The supply is there.

Thankfully demand seems to be picking up. With hopes of a COVID-19 vaccine within reach, there are notions that restaurants will be able to re-open sooner than anticipated, and human gatherings of more than 10 people can occur. That vaccine notion lifted prices earlier this week.

Demand seems to be improving

Boxed beef values have improved over the past two weeks, which will likely firm cash cattle prices. Just weeks ago the industry was under fear that because of Covid, holiday parties would be tempered and demand for beef would come under fire.

I have maintained a different outlook. Because of Covid, many families may not have the normal large holiday gatherings with 20 to 30 people. Since you are not feeding 20 to 30 people, you will likely not buy that large Christmas ham that could feed a crowd. Instead, because of a smaller crowd, families may opt to choose a fancier cut of meat, such as steak. It wouldn’t surprise me to see demand for higher quality cuts of steak be served in high unexpected numbers over the holiday season.

Impressive exports

Exports demand overall is impressive. Recent Cumulative export sales data for 2020 suggested that 858,395 tons of U.S. beef has been exported, up from 807,555 tons last year. This is also up from the five year average of 726,000.

Higher feed costs

Grain prices have increased. Most times, higher feed costs often eventually translate into higher cattle prices. Remember going forward into 2021 that the supply situation is perceived to change. 

Looking back at the spring of 2020, due to Covid complications, fewer cows were bred, the market saw liquidation of cows, and some feel that the extreme drought still being endured in the southwest and western United States led to additional herd liquidation that may not have yet shown up in the market place. 

The next Cattle on Feed Report on November 20th may shed further light on that.

Right now technical resistance with December futures is at the $114.00 price point. If December futures can find enough friendly fundamental news in the weeks ahead, and take out $114.00 resistance, the next upside target is near the $120.00 level.  If $114.0 cannot be breached, then expect prices to trade in a sideway pattern where $104.00 is support and $114.00 stays as resistance.

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. 
Hide comments
account-default-image

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish