Strong Markets, But COVID Great Unknown
By Jeff Rose
Mother nature is amazing. In the last issue, I pondered if we could get any kind of a rally in early 2021. After a week and one half of sub-zero temperatures and blizzards as far south as Texas, I have my answer.
Cash prices have rallied almost $8.00 since mid-December, and April futures have posted an all-time contract high of $126.70. That’s only $3.30 away from $130.00, the price we have come to expect the past few years. For sure, higher corn prices are leading to higher cattle prices, but frigid weather in the major cattle feeding areas has slowed the rate of gain and made shipping cattle a low priority on the farm.
This weather has had one rather unusual effect; a few major packing plants have had to cut hours or shut down because of power outages. We know what direction that will drive the market, but it should be short-lived. Cutout remains solid, exports finished 2020 very strong and packers, of course, are profiting. With weather causing carcass weights to drop, we could be at the beginning of more stability in our markets.
My advice to cattle feeders this time of year is usually to take advantage of market optimism and get some risk management in place for summer and fall cattle before the end of March, or the end of April at the latest. I still like that strategy, but if you are tolerant of a little risk this may be the year to wait and see if the tighter numbers expected this summer lead to higher prices.
I don’t want to talk about COVID-19, but it’s necessary. It is the risk wild card that will be with us at least until summer and I wouldn’t be surprised if it is still affecting market psychology this fall. Notably, changes in weather, vaccine availability and new strains are part of it too. There are some pretty good pricing opportunities out there.
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