Feedlots are getting closer to normal after the disruptions caused by the coronavirus earlier this year, University of Nebraska ag economist Elliott Dennis says in his “In the Cattle Markets” column.
“The recent cattle on feed report suggests that cattle feedlots are coming closer to sorting through much of the backlog associated with plant closures and shutdowns as a result of plant workers testing positive and plants implementing CDC and OSHA worker health recommendations,” he says.
Dennis says the trend in cattle on feed over 90 and 120 days helps illustrate this.
“For example, the number of cattle on feed over 90 days has dipped below 2019 levels for the first time since April,” he says. “However, cattle on feed over 120 days is still about 10% higher than 2019.”
Heavier weights pressure cattle prices, and even with lower-weight cattle the record beef production will need consumers, Dennis says.
“Cattle feedlots look like they are once again reloading with cattle less than 700 pounds, potentially sustaining record beef production in the long term that will need to be consumed,” he says.
Dennis says exports will play a prominent role in sustaining domestic cattle prices.
“Exports have partially dampened the effect of lower domestic beef demand resulting from government restrictions due to COVID-19 concerns,” he says.
Looking at sales commitments helps show the export expectations and the impact of COVID-19.
“So how much has COVID-19 hurt beef total commitments and what does the 2020 ending total export sales commitment look like?” Dennis asks. “… At the peak in February it was estimated that 2020 year-ending total commitments were estimated to be 1.2 million metric tons. Since COVID-19, estimated year-ending total commitments are now at approximately 0.9 million metric tons.”
China has been buying more beef, although Dennis says the U.S. has a relatively small market share there compared to Brazil, Argentina and Australia. Still, ongoing African swine fever issues could mean continued strong export demand for U.S. beef.
“Larger than average Chinese beef sales is largely due to the continuing African swine fever issues occurring in Southeast Asia and Eastern Europe,” Dennis says. “… How well these areas of the world do at controlling ASF will likely continue to a primary demand pull of U.S. beef export sales.”