Moving forward: CattleFax optimistic about market rebounds
“Clearly, at this point in time, COVID-19 is the dominating factor shaping markets in the agriculture sector, and every other sector in the U.S. economy for that matter right now,” states Patrick Linnell, CattleFax analyst, during CattleFax’s most recent Cow/Calf Trends webinar, published May 20.
“The lowest production levels we’ve seen occurred in April, but they are now behind us, and we have only continued to see increases in production as the year moves forward,” he adds.
During the webinar, Linnell provides an update on current and past market numbers, as well as CattleFax’s outlook for markets as the year progresses.
“During the week of May 11, USDA fed-cattle slaughter ran a pretty steady pace through the bulk of the first quarter,” Linnell says. “Then, due to the plant closures, slaughter dropped to roughly 60 percent of maximum capacity, and we had about one million head of fed-cattle backed up that were intended to go through slaughter.”
However, he notes slaughter capacity has been on the rise since the first of June and is now back up to 75 percent of maximum capacity.
Linnell also says CattleFax predicts the U.S. will get back to a 500,000 head kill week. Yet, as the industry gains slaughter capacity, he believes there will still be a backlog in the system.
“Although we are gaining back some slaughter capacity, we are creating a larger backlog in the system since we still can’t move through the underlying supply intended to go through the packing plants,” he explains. “In fact, before the end of the year, CattleFax predicts we will see up to 1.3 million cattle backed up.”
As far as total cattle production predictions, Linnell says CattleFax anticipates it will remain constrained through the month of June.
“Then, hopefully, we will start seeing some numbers that are closer to what we consider normal,” he states.
Linnell adds, “While looking at beef production, there is an overlying, offsetting factor – carcass weights. In fact, the last reported steer carcass weights were up roughly 41 pounds compared to year ago levels.”
He notes while there were some elevated weights reported prior to the coronavirus outbreak, the backlog of cattle, leading to cattle on feed for longer periods of time, is the main cause of the particular issue.
As far as the pork industry goes, Linnell notes the massive levels of pork produced during the first quarter.
“When COVID-19 hit, we saw pork production slip below 60 percent of maximum industry capacity,” he states.
Because of this, the pork industry saw a significant backlog in hogs, leading to the destruction of piglets and euthanization of hogs.
“Considering the pork production system is a little more flexible and forgiving than the cattle industry, we can anticipate hog producers will be pushing to move production forward,” Linnell notes.
“We certainly saw the most significant destruction in poultry production due to absenteeism and plant closures in the month of April,” Linnell explains.
Although poultry numbers are trending upward, he notes he doesn’t see a lot of improvement for placed broiler chicks in the near future.
“Throughout the second quarter, chicks placed were down nearly six percent compared to year ago levels,” he says. “We can expect poultry production will stay restrained throughout the summer months.”
However, Linnell also points out, due to the poultry industry’s flexible nature, it will bounce back quicker than both the beef and pork industries.
Linnell then mentions the U.S. protein trade front.
“Pork exports started the year on extremely strong footing. In fact, we were up roughly 40 percent compared to year ago levels. Beef exports were up 10.5 percent and broiler exports were up eight percent,” he explains.
Similar to his optimism for domestic markets, Linnell says he believes protein exports will return to the positive trend they saw before the pandemic.
Hannah Bugas is the assistant editor for the Wyoming Livestock Roundup. Send comments on this article to firstname.lastname@example.org.