Cattle outlook brightens for 2021
Feeder market influenced by lower overall supplies
By Jerry Klassen, Columnist, Grainews (Canada)
January 7, 2021
During mid-December, Lethbridge-area feedlots were selling fed cattle in the range of $138 to $140, up $2 to $4 from 30 days earlier. While Canadian feedlot operators are contending with a backlog of market-ready supplies, cattle on feed 150 days and longer are actually below year-ago levels south of the border.
The USDA lowered its projections for 2021 first- and second-quarter beef production on the December WASDE report. These lower production estimates come on the heels of two Alberta and Saskatchewan cattle-on-feed reports that showed a sharp year-over-year decline in feedlot placements.
As of mid-December, Canada and the U.S. had approved the Pfizer BioNTech COVID-19 vaccine. The U.S. was in the process of approving a second vaccine from Moderna. Beef demand is expected to resume some type of normalcy during the second quarter of 2021. The seasonal lows are likely in place for feeder cattle. Feed grain prices remain firm but strength in the fed cattle market should underpin replacement values. As of late December, a small group of larger-frame, medium- to lower-flesh steers weighing 920 pounds were valued at $174 in central Alberta. Steer calves weighing 500 to 525 pounds were trading in the range of $225 to $230 across the Canadian Prairies. Lower beef production and strengthening demand bode well for fed and feeder cattle prices.
U.S. feedlot placements were down 900,000 head during March through May of 2020. Cattle on feed 150 days or longer are down from last year and below the three-year average. U.S. market-ready supplies as of Dec. 31, 2020 are expected to be slightly below year-ago levels. U.S. carcass weights are declining and will continue to decrease into the spring due to the higher feed grain prices. U.S. first-quarter beef production is expected to be similar to last year. (February of 2020 had 29 days instead of 28 — if we account for this extra day, beef supplies in the first three months of 2021 will be similar to 2020). During the second quarter, market-ready supplies are expected to marginally decline. U.S. second-quarter beef production is expected to come in at 6.810 billion pounds, down slightly from the 2019 output of 6.814 billion. The fed cattle price structure during the second quarter should be similar to 2019. The latter half of 2021 looks very optimistic. The USDA is projecting a sharp year-over-year decline in 2021 third- and fourth-quarter beef production. Fed cattle prices are expected to be quite strong in the final quarter of 2021.
Cattle numbers in Western Canada ...