An optimistic outlook: Hog and cattle prices look optimistic moving deeper into the new year

Although 2020 proved there are no guarantees and being flexible is a critical trait to possess, several livestock industry experts are optimistic about hog and fed cattle futures as they look toward the second quarter of the new year.

Hog market rebound

            Following a sluggish first quarter, Iowa State University Extension Livestock Marketing Economist Dr. Lee Schulz believes hog prices will rebound in the second quarter. 

            “First quarter lean hog prices should average between $63 and $67 per hundredweight but will push into the $70s over the next several months,” says Schulz. “Second quarter prices should be in the $70 to $74 range, with prices averaging between $74 and $78 in the third quarter and $63 to $67 in the fourth.” 

            “Year-to-year comparisons are difficult because of what happened in 2020, but I do expect higher prices, and a lot of this will be driven by what we see in the second and third quarters,” he continues. “I think we’ll be seeing more seasonal prices in 2021.” 

            Schulz notes the hog industry has returned to seeing 2019 slaughter levels in addition to heavier weights from the same time a year ago. He attributes this to the mild winter weather and early harvest.

            “As of Sept. 1, 2020, sow numbers were lower than 2019 numbers, and farrowing intentions were down. However, as the price outlook begins improving, producers may be tempted to hold on to their sows,” he says. 

            Additionally, Schulz notes feeder pig prices are very strong. 

            “One caveat, however, is rising production costs,” says Schulz. “Although prices are similar to those in 2019, production costs will likely be much higher. In fact, with the higher price of grain, these costs are up about $5 per hundredweight.”

Increasing fed and feeder cattle prices

            Elliot Dennis, University of Nebraska-Lincoln livestock marketing economist, says fed cattle prices are also looking optimistic for the second quarter of 2021.

            “The second quarter marks the start of the grilling season, and I think people are pretty optimistic about getting back to the things they were doing before the COVID-19 pandemic,” Dennis says. “Therefore, I think we will see a lot of cattle marketed in the second quarter, with prices averaging between $115 and $120, causing the market to rebound during this time.”  

            Dennis notes the cattle industry is on the downward slide of the annual price cycle, which means cow numbers are unlikely to increase over the next year or two. He believes cow slaughter and heifer retention numbers reflect this sentiment.

            “Feeder cattle prices should be really strong in 2021,” he says. “I would say 500 to 600-pound feeders should be priced around $165 to $170, with 700-pound feeder cattle coming off grass into the $150 range. Those prices are about $8 to $10 per hundredweight higher than the year prior.” 

             Although the price outlook is optimistic, Dennis says there are a few concerns for the cattle market moving deeper into the new year.

            “Higher corn prices are cutting into margins, but they are likely not sustainable over the long-term,” he notes. “Additionally, there are some concerns in regards to the export market and uncertainty surrounding the new presidential administration.” 

            Hannah Bugas is the editor of the Wyoming Livestock Roundup. Send comments on this article to roundup@wylr.net.