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Will cattle futures enjoy a bull market in 2020?

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Live cattle futures managed to show gains for a third successive year in Chicago in 2019, but only just.

 

It required a firm performance in December, helped by hopes of a phase one China-US trade deal, to bring the market back into positive territory.

 

That said, any gains at all for the year had looked unlikely in September, when futures fell to a nine-year low, on a spot contract basis, after a fire at a Tyson Foods plant cut US processing capability, at a time when feedlots had a sizeable population to market.

 

Will live cattle manage a fourth year of headway? Or will it suffer from competition between beef and other meats, with US pork and chicken output seen rising in 2020?

 

Leading commentators give their outlooks.

 

 

 

Goldman Sachs

Global protein markets are experiencing a sharp fall in supply, driven by African swine fever and drought-stricken Australian cattle.

 

We forecast short-term upside to beef prices given:

 

  • substantial tailwinds from increased imports from Japan and Mexico, which have loosened agricultural trading relationships with the US in recent months.

 

 

  • a contracting US herd in early 2020, as heifer slaughter is up 7% year on year, and bull slaughter down 3%.

 

 

Derrell Peel, Oklahoma State University

The new year brings with it several changes in ongoing market dynamics, some new opportunities, and some new risks and continuing challenges for cattle and beef markets.

 

The international market situation is somewhat clearer now after trade disruptions and uncertainty strangled many agricultural markets for much of the past two years.

 

The beef supply situation is expected to be more supportive in the coming year with cyclical herd expansion over and beef production peaking.

 

The current status of the cattle cycle will be confirmed in the US Department of Agriuclture’s Cattle inventory report to be released the end of January. In general, cattle numbers are expected to be down slightly year over year.

 

Beef production is expected to peak fractionally higher in 2020 with heavier carcass weights offsetting a slight decline in cattle slaughter.

 

Total US meat production will once again push to new record levels in 2020 with beef, pork and poultry all at or near record levels.

 

Trade improvements will be critical to provide a strong international component of meat demand in addition to domestic demand.

 

 

 

Rabobank

After four years of beef cattle herd expansion in the US, cattle numbers are peaking. The cattle and beef production cycle plateau presents a stable outlook for 2020.

 

Expectations are for beef production to be up by 0.8% year on year. Harsh weather conditions during the calving season are expected to reduce the calf crop size, but increases in carcass weights of fed cattle will offset the decline.

 

While cattle and beef production and prices are expected to be stable, there is still potential for disruption, particularly from supplies of competitive meats.

 

Domestic broiler production is expected 2-2.5% higher in 2020, with domestic pork up by 3-4%, resulting in intense market competition.

 

A second major uncertainty is the ongoing spread of African swine fever in China, Asia, and eastern Europe.

 

At the same time, a new trade agreement with Japan, potential for USMCA ratification, and a phase one trade deal with China are expected to increase protein purchases.

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