Cattle Numbers Will Become Short, Markets Will Take Off
By Pat Lampert
I read an article at the end of July that said cattle feeding margins were slowly improving to a loss as of July 24 of $141. Further, it said packer profits were estimated at $302. That’s a $443 swing. And not in the cattleman’s favor.
Cattle feeder closeouts for the same week a year ago came in at a $49 profit while packer margins were $150 per head profit. That’s a $101 swing. Listening to the so-called cattle experts is like listening to the news about COVID-19. You’re better off turning off your cell phone newsfeeds and TV and radio receivers. It’s just one contradiction after another.
Cattle numbers will become short. We estimate they will get tighter by the end of the third and the beginning of the fourth quarter, and into 2021. Further, producers have not been retaining heifers the last two or three years. A large percentage of heifers went to slaughter during that time and it’s going to show up in the lack of overall numbers.
Thankfully, the CME is rebounding somewhat. On June 15, August opened around $94 and August 4 hit $103. October and April prices back in mid-June were around $98 and $109 respectively, and hit $108 and $116 August 4. Markets are moving in the right direction; we just need another 30 days of limit-up moves.
I know these last four months have been agonizing. Low cash prices and the inability to contract at a profit means producers are holding cattle. It’s truly been miserable. But the good news is, things are turning around. I’ve told feeders who have been selling into this pandemic the last few months, not to base the loads they sold recently on the last year.
Most had cattle contracted at decent levels and these under-valued cattle are a real kick, but don’t base the whole year on COVID-19 developments.