USDA’s Jan. 1 cattle inventory — showing a reduced herd and a 1% decline in the 2019 calf crop — is expected to have a positive effect on cattle prices in 2020.

Live cattle prices throughout the sector should be higher as long as demand stays strong, Katelyn McCullock, director of the Livestock Marketing Information Center, said.

LMIC is expecting fed cattle prices to increase $4 to $6 a hundredweight on average in 2020. Feeder cattle and calves could see even bigger gains, she said. Prices for 500- to 600-pound steers might be a little below last year’s average in the first quarter but moving forward could see some big gains, particularly in the fourth quarter, she said.

Fourth quarter prices could be $10 a hundredweight higher than the same period in 2019, assuming a large corn crop and modest feed prices, she said.

Prices on 700- to 800-pound steers will likely see a smaller price increase over 2019, but the annual average is expected to be $4 to $7 a hundredweight higher than 2019’s average, she said.

All these prices are based on expected slightly lower corn prices in 2020 and fairly stable demand, she said.

Demand has been really good the last two years, and she’s not sure if that will hold. One potential challenge for beef would be a domestic and global economic slowdown in late 2020, she said.

Demand for animal protein in China, due to African swine fever, should have a big impact. But now the corona virus could have a negative impact on global demand, she said.

Cow-calf returns should be better in 2020 on better calf prices and better cull cow prices. A lot of foreign lean beef that was coming to the U.S. is going elsewhere, which should raise cull cow prices in the U.S., she said.

John Nalivka, owner of Sterling Marketing in Vale, Ore., expects cow slaughter to be down 3% year over year in 2020. That would also support cull cow prices, and cull cows are 10% to 15% of a rancher’s revenue, he said.

He also thinks cow-calf operators are in for a better year due to fewer available feeder cattle supplies. In addition to the reduction in the 2019 calf crop compared with 2018, USDA revised its 2018 calf crop estimate down 100,000 head, he said.

He calculates 2020 cow-calf returns against cash costs at $144 per cow, compared to $117 per cow in 2019.

He also thinks ranchers, to some extent, will begin to retain heifers for breeding this year — which will further reduce the available supply of feeder cattle.

Year-over-year cow slaughter increased 5% in 2016, 6% in 2017, 7% in 2018 and 4% in 2019, he said.

“At some point you have to begin pulling heifers back into the herd,” he said.

And he thinks cow-calf producers will make a little more money this year due to good demand and better exports in the second half of the year.

“I think the incentive will be there” to retain heifers, he said.

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