Cattle markets power into new year

Cattle prices barreled into 2025, propelled by strong consumer beef demand, declining cattle numbers and slower packer production. 

For perspective the weighted average five-area direct FOB live steer price the first full week of January was record-high at $202.58/cwt. The weighted five-area average dressed delivered steer price was at $320.25

“Wholesale beef prices finished 2024 on a strong note, carrying record beef prices into 2025. The strength of this wholesale beef price trend likely helped support record slaughter cattle prices through the holiday season,” according to analysts with USDA’s Economic Research Service (ERS).

The five-area direct weighted average FOB live fed steer price in 2024 was $11.11 higher year over year at $187.25/cwt., according to ERS data. The weighted average dressed delivered steer price was $17.91 more at $295.86.

Keep in mind U.S. beef exports continue providing added underpinning. For January through November in 2024, beef export value was 5% higher year over year, equating to $421.58 per head of fed slaughter, according to data released by USDA and compiled by the U.S. Meat Export Federation

Higher prices ahead

ERS increased the expected five-area direct average fed steer price in the January World Agricultural Supply and Demand Estimates. Compared to the previous month, forecast prices increased $6 in the first quarter to $194/cwt., $5 in the second quarter to $194 and $4 in the third quarter to $196. The projected annual average price increased by $5 with increased optimism stemming from recent prices and continued strong beef demand.

Along the way, cash calf and feeder cattle prices marched higher. Steers weighing 500-600 lbs. averaged $333.65/cwt. in the South Central region the week ending Jan. 11, according to the National Weekly Feeder and Stocker Cattle Summary. That was $64.45/cwt. more (24%) year over year.

Suspended importation of Mexican cattle to the U.S, begun toward the end of November, due to New World Screwworm, added extra market boost to calves and feeder cattle.

“This has limited feeder cattle typically available to feedlots in the Southern Plains. These feedlots are likely drawing down on supplies from other U.S. areas, boosting feeder calf prices,” according to ERS analysts, in the January Livestock, Dairy and Poultry Outlook.

Compared to the previous month, ERS projected the average feeder steer price $3 higher in the first quarter of this year to $268/cwt. and $2 in the second quarter to $272. The third-quarter projection was unchanged at $275. The forecast annual average price increased $1.25 to $273.25. Prices are basis Medium and Large #1 steers weighing 750-800 lbs. and selling at Oklahoma City.

ERS emphasizes these price projections assume the ongoing suspension of cattle imports from Mexico, since no date has been established for resumed trade.

“Current high prices are reminiscent of the cyclical peak prices of 2014-15 with both having been provoked by drought-exaggerated herd liquidations,” says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his late-December market comments. “However, some very important differences mean that the current situation will play out in a much different fashion going forward.”

Peel explains the previous herd expansion from 2014 to 2019 was sharp and rapid with high prices lasting about two years. He adds the pipeline of replacement heifers was building ahead of the expansion, making its degree and speed possible.

“With two years of high prices already in 2023-2024, there is no indication that cyclically high prices will be as short-lived as a decade ago,” Peel says. “The pipeline of replacement heifers has continued to be depleted to this point. The cattle industry has shown no signs of attempting to rebuild the herd yet and the process will be slower when it does happen. The peak prices in 2014-15 coincided with increased heifer retention that squeezed feeder supplies to the tightest levels. Since no heifer retention has occurred yet, the highest prices are ahead, possibly in 2025 but more likely beyond.” 

Déjà vu — round two

Although nominal feeder cattle prices reached record highs last year, Josh Maples, Extension livestock economist at Mississippi State University, notes that producer revenues, when adjusted for inflation, remained below those of previous record high prices in 2014-15. In other words, he says prices remain below levels required to spark herd expansion.

“Year-to-date beef cow slaughter is down by 18%, but the implied cull rate — calculated as slaughter divided by inventories — remains at 10.2% for 2024, well above the level that would indicate herd expansion,” Maples says in the late-December issue of Cattle Market Notes Weekly. “Heifer slaughter data also shows no signs of herd expansion. Year-to-date heifer slaughter is down 1.1%, with no evidence of heifer retention occurring at a rate sufficient to signal herd rebuilding … It could very well be that feeder cattle prices have not yet peaked, and the market is beginning 2025 with more optimism.”

USDA’s Cattle report Jan. 31 will offer insight to the rate of beef cow herd liquidation last year.

Whether or not heifer retention begins this year, Peel says cattle prices should remain elevated for two to four more years. He offers a couple of scenarios in his early-January market comments.

If heifer retention begins this year, Peel explains tighter feeder cattle supplies will push cattle prices and cow-calf returns higher. Retained heifer calves would lead to increased heifer inventories in 2026 and potential beef cow herd growth in 2027. 

Conversely, if heifer retention fails to begin in 2025, Peel explains, “The cow herd will continue to dwindle, and cattle supplies will continue to slowly contract with higher cattle prices and a smaller industry until herd rebuilding begins.”

As it is, Peel notes the beef cow herd likely contracted last year, while limited supplies of replacement heifers suggest further contraction or stabilization at best in 2025.

“Historically, herd expansions require a year or two to gain momentum before herd inventories begin to increase. That process has not begun,” Peel says.