Since April, cattle futures have recovered from the initial COVID-19 price sell off. While there was a bit of price wobbling in mid-November due to fears of another large-scale COVID-19 shut down, the notion of a vaccine available in early 2021 has tempered those fears.
Overall, during the month of November cattle futures traded in a mixed $5 price range.
The cattle outlook into 2021 looks supportive. The theme of heavy cattle, and plentiful numbers that kept prices in check for November is starting to shift as we wrap up 2020 and head into 2021. Prices gapped higher the trading day after the November cattle on feed report, which saw placements and total cattle on feed below estimates. The total number of cattle on feed as of Nov. 1 was at 101%. Placements in feedlots was at 89% while marketings for the month of October came in at 100% which was in line with the average guess.
Also supportive for the cattle complex is how beef prices have been surging. In the first three weeks of November, Choice beef was up 18% and into the $240s per hundredweight. The cutout has been improving slowly for weeks now, and in late November, was trading near $245.06, which was the highest since early June. In prior years when the cutout has improved like this, it has implied cattle futures then trade in the mid $120s or even higher.
Daily and weekly technical chart indicators are turning positive which suggest further upside for futures prices ahead. Cattle futures also have bullish seasonality into December. Given the strong surge in beef, it appears domestic demand for beef has been strong. I hold the view that with many families having smaller holiday gatherings this year due to COVID-19 complications, the traditional large holiday turkeys and hams will be less popular. Not needing to feed a large group at the holidays may leave families looking for an alternative menu.
While some Americans have been out of work due to COVID-19, a good portion of America has made the shift to working at home, and has still been receiving a paycheck. With the many limitations that 2020 has pressed on Americans, it might be nice to splurge on steak as holiday indulgence this year.
Lastly, looking a few months ahead, drought conditions continue to persist in the western United States. Unless there is meaningful precipitation this winter, this may put cattle producers in a difficult situation. Will they preserve herd size with supplemental feed or cull their herd to stretch feed resources for quality cows and calves? There will be many factors to monitor in the weeks and months ahead for cattle. However, the bottom line is that heading into 2021, the outlook for cattle is optimistic.
Editor’s note: Naomi Blohm is a marketing advisor with Total Farm Marketing by Stewart-Marketing and she is a regular contributor to the Iowa PBS series “Market to Market.” She can be reached at [email protected].
