The longest government shutdown in history is seeing no reprieve yet this week. As the fight over President Donald Trump’s border wall continues, USDA reports are at a standstill. University of Missouri economist Scott Brown says no reports or fresh data from the government may be bad news for the cattle markets.
“I worry about trade,” said Brown. “It’s hard to know what we’re doing on a weekly basis in terms of meat movements around the world. So, if we are moving more meat than we realize we are, that could have some impact.”
Brown said without new numbers regarding the cattle size, cattle prices could see a delay price action in the short-term.
“We need to be counting cattle right now,” he said. “I’m not certain that’s happening. The cattle report is big for us at the end of the month, and so if we don’t get it on time, I think that delays market movement.”
Brown said the markets will respond, but the price response will be pushed down the road. He said this comes at a time when the market is looking for data.
“All that information is what the market is hungry for when it’s in this sideways movement, so new information will help move the markets, up or down,” said Brown.
Once the government reopens and the markets starts seeing the data roll in, Brown said prices may be stuck in range-bound price action for the year.
“I sure see a lot of sideways in the markets, although maybe more downside risk than upside potential in those markets,” he said.
Brown noted three main factors that could cause more downside risk: the health of the general economy, disease and trade. The other factor that could push prices is the size of the cattle herd this year.
“I’d say for 2019 we’ll be up a little shy of 3% in meat production,” said Brown. “If we would see meat supplies not grow as much as we anticipate this year, that could give us a bigger lift in prices.”
Brown said meat will be flooding the market, not only in the U.S., but around the world as meat supplies continue to grow. The other factor Brown said could drive prices in the new year would be continued strength in economic growth.
“We created a lot of jobs out of the last December jobs report,” said Brown. “If that continues into 2019, that could be a driver of stronger livestock prices.”