Cattle futures have been able to climb higher in recent weeks thanks to strong domestic and global demand. The marketplace knows actual cattle and feedlot supplies are more than ample, so demand has allowed for the price rally.
Price outlook remains supportive as long as demand can continue at the pace it currently possesses.
Export demand has continued to stand out, with cumulative sales for 2018 up 19 percent from last year’s pace. Domestic demand also remains strong not only at the grocery store, but also evident with restaurant parking lots filled with cars all week long.
The recent Cattle on Feed report confirmed again more than ample supplies. According to the U.S. Department of Agriculture, “Cattle and calves on feed for the slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 11.1 million head on Sept. 1, 2018. The inventory was 6 percent above Sept. 1, 2017. This is the highest Sept. 1 inventory since the series began in 1996. Placements in feedlots during August totaled 2.07 million head, 7 percent above 2017. Net placements were 2.02 million head. Marketings of fed cattle during August totaled 1.98 million head, slightly above 2017.”
Be mindful of prices going forward. Remember, this is a demand-led market for the moment. If demand wasn’t as strong as it is, the market price would likely plunge lower due to the high quantity of U.S. cattle. Please do not be complacent. Consider cash contracts with your packer, or consider buying put option protection to give you a price floor.
While it seems likely that demand should remain strong, surprises can happen. When prices are profitable, be sure you are taking steps to lock in profits and minimize risk for your operation. As jittery as trade wars, trade negotiations and global economics have made other commodity markets, remember that demand can falter quickly, for seemingly “no reason.”
Editor’s note: Naomi Blohm is a marketing advisor with Stewart-Peterson Inc. and she is a regular contributor to the Iowa Public Television series “Market to Market.” She can be reached at [email protected].
