Even at the beginning of the COVID-19 crisis agricultural analysts expected that livestock producers would likely be hit the hardest. Their hypothesis was correct.
According to USDA Chief Economist Rob Johansson, with all the market and food supply chain disruptions in 2020 for cattle and hogs, the industries lost billions.
“Cash receipts were down almost $10 billion dollars year over year,” explained Johansson.
Even though the cattle market during the last few months of 2020 managed to find some strength, it was lower for the year.
For example, fat cattle prices in 2020 saw the market average near $106 (Cwt).
“That's lower than what we saw in 2018 or 2019,” said Johansson. “We are expecting that to recover this year.”
The market could possibly increase from $114 to 115 (Cwt) on average. A 7.5% rise for fat cattle over last year.
As for the calf market in the early part of 2021, January through March, CattleFax expects a 550lb steer calf to range from $160 to $170.
A factor that may impact the cattle markets in a negative way is the excepted increase in livestock feed costs. Corn prices are forecast to increase 12% while an increase of 30% is expected for soybean prices.
As for wheat, drought in the U.S. and abroad, along with record U.S. grain exports to Asia will be a key factors.
“We have seen drought significantly affecting other parts of the global agricultural space such as South America,” said Johansson. “We're seeing precipitation issues down in Argentina and we've seen also significant issues in the Black Sea area as well as subpar conditions and Europe as well.
This news has kicked off a rally in grain market led by soybeans at the beginning of the New Year. The 2020/21 season-average farm price for wheat is $4.70 per bushel.
USDA increased the 2020/21 wheat price by 20 cents in November 2020. Based on the bullish opportunity exports and weather are currently presenting the market.