The ongoing trade war with China, and other trade disruptions are weighing on the minds of many, if not everyone in Ag. But veteran global market analyst, Dan Basse said the American meat industry is bullish, and at some point that’s going to start impacting the markets.
“The cattle industry is in a good spot to really help itself with numbers. I think the domestic demand will be record strong this year and for many years going forward. I see export demand is picking up even though we have this trade blockage with USMCA and even with our friends in China, we’re still getting record amounts of beef out the door.”
Basse added not only bullish on the price front, but there’s additional good news when it comes to the cost side.
“We’re really not worried too much about the supply of grain and feed and forage going forward. The Plains looks like it has its abundance of moisture, hay supplies are adequate, forage heading into the winter will be good. We think corn prices drop to the $3 level by next summer and so there’s going to be this cheap feed that’s available to cattlemen.”
Cattle futures on the Chicago Mercantile Exchange are looking for bottom
“So we see the Chicago market as very close to a seasonal low in the next two to three weeks,” Basse noted. “We think the cash market bottoms between $100 to $102. Looking at feeder cattle prices, but because of falling feed grain prices, low interest rates, we think feeder cattle prices at this $135, $140 level catches the market, will start to move higher.” But we really think producers should be looking at the feeder cattle market because of the opportunity heading into the first quarter on breaks. There’s some margin to be made.”
With the bullish market taking shape, cattlemen may wonder if they still need to invest in genetics and management to produce premium quality grade.
“Well, the U.S. consumer demands a higher quality beef today,” Basse continued. “My response oftentimes is that I think we always need to shoot for that higher grade, but I see opportunities in both export and the consumer because of the quality of U.S. beef is so high and the tastefulness and everything else is there to keep it all going. So my advice to the cattleman is always look for grade. I think it’s a good investment going forward and that consumers will reward you with bigger demand going down the road.”
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