Livestock markets strong, grains flat, says CattleFax

The market experts at CattleFax think the window is open for several years of good livestock markets. But a primary reason for that is someone else’s tragedy.

The African Swine Fever outbreak that started in August 2018 has claimed half of China’s massive swine herd. It’s also spread to other countries, particularly China’s neighbors in Asia. “That sent a signal to the entire rest of the world to expand pork production,” said Mike Murphy of CattleFax at the annual Cattle Industry Convention in San Antonio this week.

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It has triggered what will amount to an 18% pork expansion here in the U.S. and even more in other countries that haven’t been in a trade war with China. The new demand for meat has a spillover effect into other meats, adding dollars to cattle markets, too. “This could be a several-year window of opportunity for the meats as we wait for a vaccine for ASF,” said Murphy.

Coupled with the Phase One trade deal with China, Murphy predicted that the U.S. share of protein sales to China will grow. “Beef will be a dominating factor in that,” he said.

In the coming year, with a robust general economy, CattleFax thinks cattle markets will remain strong. Fed steer prices will average $120 per cwt, up $3 from 2019. Weaned calves will average $170, up $6. Bred cows will be steady at about $1,500 per head.

The grain markets will not be so strong, a positive sign for feedlot margins. Murphy forecasts a 4-million-acre increase in corn plantings this spring, and a 3-million-acre increase in soybeans. That will keep a lid on prices because with trendline yields, it will lead to record harvests of both crops and increasing carryover stocks. “More livestock will chew up some of that, but we’ll still be expanding corn inventories,” he told the cattle producers.

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Given good weather, Murphy doesn’t expect corn prices to top $4 for the next two years, staying in a $3.50 to $4 range most of the time, and maybe dropping below $3.50 in the fall. Soybeans could gain a little in price, staying in a range of $8.75 to $9.75 in the spot futures market.

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