As 2019 comes to a close and we prepare to turn the page to a new year, a little bit of optimism is surfacing for the cattle market in 2020. This year brought plenty of challenges for producers around the country with plenty of surprises from mother nature and a significant market shock from the Tyson packing plant fire.

There’s still a lot of debate about whether or not the U.S. beef cow herd is entering a liquidation phase after aggressive expansion the past 5 years. Don Close from Rabo Agrifinance told Montana Stockgrowers this week that his analysis shows cow numbers already starting to decline. The final word on the cattle inventory will come from USDA in their report at the end of January.

Even if the cow herd has already found its cyclical peak, 2020 is likely to be a record for beef production. But economic forecasts for 2020 are suggesting strong demand and higher cattle prices.

The effects of African Swine Fever are starting to trickle in to the U.S. cattle market. As the Chinese hog herd has been decimated by the disease, more beef is being shipped to China to fill the protein gap. One key driver is the 90 percent lean trim market, which has rallied significantly the last couple months. That is driving beef imports in to the U.S. lower and supporting the domestic 90’s market.

The global protein shortage, coupled with the new trade agreements with Japan and the EU, give substantial upside potential to U.S. beef exports. Maintaining a free trade agreement with Canada and Mexico, should help support values as well. If an agreement with China can cross the finish line, the potential for exports increases further. But that is a big if.

On the domestic front, the longest economic expansion in history continues to support beef demand. Risk of a recession does remain but beef demand will find support as long as consumers have money to spend. The cattle industry may be pulled from two directions as beef production and cattle on feed numbers grow. But improved profitability for cattle feeders and stockers already appears to be supporting higher prices.

Don Close told cattlemen at the Stockgrowers Convention that he sees a lot of upward potential for cattle prices in 2020. Right now, his forecasts are suggesting feeder prices heading in to next fall could range from 155 to 165.

Montana State University Agricultural Economics Professor Emeritus, Gary Brester also spoke to the convention on the current cattle market situation. He told producers not to expect big swings in the beef cow herd inventory and prices moving forward. Rather he suggested that we may see more muted cattle cycles in the future.

Brester said one of the headwinds for beef producers to watch out for next year is increased competition from pork and poultry. Increasing production from cheaper competing proteins will put pressure on retail beef values.

Looking out to 2020, Brester said that given where the feeder cattle futures for next fall are sitting and factoring in the historical basis, 500-600 pound feeder calves could bring $165-$175 next October. 6-700 pound calves might range $155-$165.

Also this week, CattleFax released their price expectations for 2020. They are forecasting finished steers to average 118 next year, with potential to top out near $130. 750 pound steers are estimated at an average of $146 and 550 pound steer calves at $165, both just slightly ahead of their 2019 averages.

 

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