The livestock industry was caught in a tug of war in 2019 due to big supplies, but strong demand or at least the hope for demand from China. However, market experts are looking for improved trade prospects and increased exports of all proteins in 2020 to chew into some of the supply.
The U.S. livestock industry is the best position to capitalize on the trade deals that are falling in line. The U.S.-Japan agreement went into effect Jan. 1 and will level the playing field for pork and beef producers with countries in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. The House passed the U.S.-Mexico-Canada Agreement in December 2019 and the Senate is also expected to pass the deal in January. Plus, a China deal could also be positive, especially for the pork industry with the devastation of their swine herd due to African swine fever.
“I think the export demand will be good for pork, chicken and beef,” says Tim Petry, North Dakota State University Extension livestock economist.
That demand will balance out the cattle supplies for 2020, which Petry says should be close to 2019.
“We’re expecting only a 1% increase in beef production this year, and with strong domestic demand and what could be record exports, that will really help us out on the price side,” he says.
Bryan Strommen, with Progressive Ag of Fargo, N.D., says September cattle-on-feed numbers were smaller for the first time since December 2016.
“So, I do think our supplies tighten as we move forward, but we did have some larger placements from grass this summer,” he says.
Placements for October through December were up from a year ago.
“I think you look at the pasture conditions this summer, a lot of those calves were held out of the feedlots. We had good grass, and those calves came in the feedlot this fall because of that,” Strommen says.
The live cattle futures took a huge plunge in the summer following the fire at the Tyson plant in Holcomb, Kan. The market hit a 10-year low Sept. 9 in reaction, but then rallied over $20 as packers were making huge margins and were able to bid up for cattle. The rally was also sponsored by funding buying. Current indications are the commodity funds are going to continue to defend that long position, which provided some good hedging levels.
As far as price projections and marketing advice, Petry says if everything comes together, he thinks cattle prices can exceed 2019. However, he cautions fed cattle producers not to drop their guard.
“Remember the Tyson fire? We weren’t expecting it. What happened to prices? They dropped $13 in a short time. So take some price protection,” he advises.
For feeder cattle, Petry says futures prices are above last year. However, the big key will be the availability of corn and what the price will be going forward.
For the hog market, analysts say exports will be the key as supplies have been at record levels every year since 2015 and are projected to be up another 3% to 3.5% in 2020.
“The potential for exports looks good particularly into China and all of Asia because African swine fever is all over. About a fourth of the world’s production is going to be lost in 2020 so there is going to be a lot of need for pork,” Petry says.
Strommen says the export picture for pork is very encouraging, especially with that growing need for protein globally.
“When you look at the export sales that we’ve done in 2019, they are substantially higher than 2018, and export sales for 2020 are already substantially above the five-year average,” he says.
Hog producers had some good marketing opportunities on the futures in 2019 and Petry says there are still good price levels in the deferred futures for 2020 they can lock in.
“Don’t get lulled to sleep. We don’t know all the fine print of the China deal yet, so some price protection is warranted,” he says.
Strommen agrees. “You don’t have to do 100% of what you’ve got for production, but do bits and pieces. Know your break even and take advantage of those opportunities.”