(KMAland) -- People across many sectors of the U.S. agriculture industry have to be among the happiest Americans to see 2019 end.
One specific sector of agriculture that didn’t enjoy 2019 was the livestock industry. Mike Zuzolo, President of Global Commodity Analytics, says the livestock industry didn’t have a good year.
“No it wasn’t, I mean, given the packer break-evens being in the hundreds of dollars for a lot of the time for cattle, and given the cash prices of hogs struggling to get above the $50 live prices and seeing that African Swine Fever was decimating half of the world’s hog production and hog herd, I would say that 2019 was a big disappointment to the cattle and hog industry.”
Things were especially challenging in the second half of 2019.
“Not with just the trade issues but also the major fire at Holcomb, Kansas, at the Cargill plant really shot the cattle prices down sharply below break-evens and they did not recover for several weeks. This is where 2020, if we’re going to create a demand-driven low in the grain markets since the trade frictions are giving way to more normalized trade, I would look for the protein markets to find their support and their buying in the short covering by funds first, and that we have a protein market that leads the grain market higher in 2020.”
While the fire in Holcomb, Kansas, was a big deal, Zuzolo says it shouldn’t have hit the livestock markets as hard as it did.
“In my opinion as a livestock analyst, it shouldn’t have. But, the market saw cash prices for cattle collapse, and, at the exact same time, you saw ground beef prices and boxed beef prices shoot sharply higher with expectation that you would have a tighter supply, and so the cattle producer/rancher was taking a major hit. Cattle prices in the live cattle market went from a level of about $108 all the way down to $93-95 by early September.”
At the same time, retail prices in the grocery store and at the wholesale level were sharply higher, which he says, “made matters worse.” There are a lot of cattle placed out there and more cattle on feed that aren’t getting into the marketing channel as rapidly. Zuzolo says cattle producers have been waiting for low prices to turn around.
“This goes back to the cheaper prices and the low prices. The only thing the rancher can do, the cattle guy/producer can do, is hold back his cattle, feed them out, heavier weights, waiting for better prices, and that’s what he’s done, and he’s done a good job because we’ve gone from $95 to $122 at this point."