Andrew Griffith believes cattle feeders have two thoughts on their minds: avoiding a rough winter similar to last year and avoiding another market collapse.
“It is likely that many feedlots have tried to address the muddy pen situation of 2019 that resulted in many inefficiencies, which should be of benefit if another wet winter occurs,” he says. “Similarly, many feedlots have probably been more proactive in their price risk management strategy to avoid major market losses.”
Recent strength in live cattle futures helps provide some hope for 2020, says the University of Tennessee ag economist in his weekly market update.
Beef prices also continue to strengthen, Griffith says, especially in the Choice market.
“The expectation could be for retail value of beef to continue escalating given that wholesale beef prices in November were 7.7% higher than the previous month,” he says. “Another factor that may soon influence retail beef prices is the deal with China that has sent equity markets soaring.
“It is difficult to fathom that a deal with China will result in a lot of U.S. beef going to China, but it could help clear some pork and poultry stocks which would pull down some of the meat protein stocks. This is a situation that is worthy of beef cattle producers’ attention as it could provide support or continue to weigh on the market.”
Griffith says it is the time of year where many cow-calf producers are set to hold calves until the new year because of the seasonal price bump and for tax purposes. However, he says receipts are usually light over the holidays.
“What makes strong receipts even more puzzling is that soft prices continue to dominate the market,” he says. “Many cattle producers continue to be disappointed in calf and feeder cattle prices but yet they continue to sell calves.
“The sell-off of animals could be due to resource constraints such as feed availability or having to move one calf crop before the next one begins hitting the ground, but either way, it would appear some producers have put themselves between a rock and a hard place as it relates to marketing cattle.”