With by Wes Ishmael
“ the higher grain prices and forage prices , we will see persistent pressure on feeder cattle and calf prices into 2021 ,” said Stephen Koontz , agricultural economist at Colorado State University , in a November issue of In the Cattle Markets . “ One dollar higher corn costs translate into about $ 6- $ 7 / cwt . lower feeder cattle prices . This cattle price impact is being exacerbated by dry conditions in the western U . S . and hay prices that are creeping higher . The impact on calf prices will be greater .”
Koontz pointed out corn futures ( 2020-21 crop ) at the time were about $ 1 higher than in August and soybean futures were about $ 2 higher , including deferred contracts . He added that prices for both appeared to be at a premium to what underlying fundamentals suggested .
“ Stock-to-use ratios imply more reasonably mid-to-high- $ 3 corn and mid-to-high- $ 9 soybeans . That is unless the long-term demand picture is also changing . And there is some evidence that is the case ,” Koontz said . “ Corn export demand has been strong but for soybeans is considerably more so . Consumption of corn is also picking up from ethanol production . The crop market fundamentals are looking more like they did in the years prior to the trade war . Soybean demand may pull considerable acres to that crop and buoy both soybean and corn prices .”
Export strength and iffy weather in South America were two reasons behind the fall ’ s dogged increase in grain prices . Reduced expectations for U . S . production were another .
In the November World Agricultural Supply and Demand Estimates ( WASDE ), USDA reduced expected ending stocks for corn to the lowest level since 2013-14 and increased the season-average corn price by 40 ¢ to $ 4.00 / bu . USDA also reduced projected ending soybean stocks to the lowest level in seven years and increased the expected season-average price by 60 ¢ higher to $ 10.40 / bu .
Prospects for feed costs were behind USDA ’ s Economic Research Service ( ERS ) lowering expected 2021 feeder steer prices by $ 1 in the November Livestock , Dairy and Poultry Outlook ( LDPO ).
Specifically , ERS forecast feeder steer prices for 2021 at $ 133 in the first quarter , $ 136 in the second , $ 141 in the third ; annual average price of $ 138 . That ’ s basis Oklahoma City for Medium # 1 .
At the same time , ERS left the expected five-area direct fed steer price unchanged for 2021 : $ 113 in the first quarter , $ 110 in the second quarter , $ 114 in the third quarter ; annual average price of $ 114 .
Questions about Economy Linger The backdrop to all of that are domestic and global economies in the midst of recovering from the pandemic , even as the pandemic continues .
“ We are projecting a somewhat less severe , though still deep recession in 2020 , relative to our June forecast ,” according to analysts with the International Monetary Fund ( IMF ), in October ’ s quarterly World Economic Outlook . “ The revision is driven by second quarter GDP outturns in large advanced economies , which were not as negative as we had projected ; China ’ s return to growth , which was stronger than expected ; and signs of a more rapid recovery in the third quarter . Outturns would have been much weaker if it weren ’ t for sizable , swift , and unprecedented fiscal , monetary , and regulatory responses that maintained disposable income for households , protected cash flow for firms , and supported credit provision . Collectively these actions have so far prevented a recurrence of the financial catastrophe of 2008-09 .”
Globally , IMF pegged 2020 GDP at -4.4 %, followed by 5.2 % in 2021 . For the U . S ., IMF estimated 2020 GDP at -4.3 %; 3.1 % next year .
“ Expectations of real gross domestic product ( GDP ) numbers have improved from the initial lockdown contractions , but recovery forecasts are still marked by uncertainty and prone to future setbacks ,” explained ERS analysts , in the quarterly outlook for U . S . Agricultural Trade published in November . “ Overall , global real GDP growth is expected to fall by about 4.4 % in 2020 . This is slightly less severe than was previously feared back in June . Global trade volume , which declined 9.2 % in fiscal year ( FY ) 2020 , is expected to increase 7.2 % in FY 2021 . The expected economic recovery in 2021 will be shaped by both regional and overall global success in containing the COVID-19 pandemic , in addition to boosting consumer spending .”
In September , the Food and Agricultural Policy Institute ( FAPRI ) at the University of Missouri revised its five-year price projections , accounting for pandemic impacts to that point .
58 • JANUARY 2021