Cattle feeder leverage is on full display as they and resilient consumer beef demand continue pressing negotiated cash fed prices higher. Prices were record-high once again the first full week of June at $232-$235/cwt. for live FOB trades in the Southern Plains and at $240-$244 in the North. Dressed delivered prices were $380.

Although cash cattle prices are historically high, driven by tightening cattle supplies relative to demand, Stephen Koontz, agricultural economist at Colorado State University suspects cyclically high prices still remain on the horizon when herd rebuilding finally takes hold. He provides perspective on snugging supplies in a recent issue of In the Cattle Markets.

“Typically beef production increases through the summer supported by heavier weights. This will likely be the case this year. But a detailed examination of placements across different weight groups suggests very tight supplies,” Koontz says. “These marketings-based-on-placements can be calculated using the Cattle on Feed report information from placements in the different weight groups. Assumptions are needed about average daily gain and days on feed to make grade. But once done, these prospective marketings are very tight compared to prior years’ calculations. 

“Another two series of inventories calculated from the report that I watch are cattle on feed over 120 days and over 150 days. Both are large and reinforce that the inventory of cattle on feed numbers is weighted to the end of the feeding period. Supplies will be tight for much of the remainder of the year.”

With supply etched, Koontz explains cattle prices will be written by consumer beef demand and communicated through boxed beef cutout values. Although wholesale beef values are currently on the high end of history, he points out fed cattle prices are more aggressive, further pressuring weak packer margins at a time of year when margins are typically among the strongest of the year.

“Therefore, up-moves for cattle will be reasonably limited and focus for the cattle outlook should be any beef market weakness,” Koontz says.

Calves and feeders

Depending on the sources consulted and interpretation of the proverbial tea leaves, historically high calf and feeder cattle markets are in a state of flux between some producers pulling calves forward to market at lighter weights than normal to exploit current prices, while others seem to be expressing more willingness to retain more heifers.

“Feeder cattle prices in recent weeks have started to ease in line with typical seasonal trends, moving down marginally as summer commences and calf supplies build towards fall,” say analysts with the Livestock Marketing Information Center (LMIC), in the early-June Livestock Monitor. “However, prices remain historically elevated due to continued supply constraints and strong underlying demand.” 

The LMIC provides regional year-over-year price perspective for Medium and Large #1-#2 steers at the end of May:

Southern Plains — $389.05/cwt. average (+21.2%)

Nebraska — $392.18/cwt. average (+10.6%)

South Dakota — $405.77/average (+15.3%)

Washington — $391.32/cwt. (+19.7%) 

Billings, Mont. — $408.89/cwt. (+20.9%), the highest level so far this year.

Georgia (500-pound steers) — $366.63/cwt. (+18.5%) 

Across these six regions, prices were an average of 17.7% higher year over year, equivalent to an increase of $58.66/cwt., according to the LMIC.  

“Since the beginning of the year, prices have steadily climbed to year-to-date highs, with an average magnitude of around 23%, which is about 2% faster than last year,” LMIC analysts say. “Among the six regions, Washington has experienced the most dramatic rise, with prices jumping 39.3% from $298.57/cwt. in January to $416 in April. While similar growth occurred last year, seasonal highs were not reached until late June, raising question about whether some areas of the U.S. have yet to see their peak.”

Looking ahead, LMIC analysts say feeder steer prices are expected to remain above last year’s levels, although the rate of increase will likely slow. 

“Among the regions mentioned, Georgia and the Southern Plains have yet to break the $400/cwt. mark, while states like Nebraska and Washington have seen a decrease from peaks of approximately 6%, falling back below the $400 threshold,” LMIC analysts explain. “Although tight supplies continue to support prices, regional variations in forage conditions and placement patterns may introduce greater price fluctuations across different areas as we move forward.”

Beef exports lose steam

U.S. beef exports lost ground in April, due in part to China’s retaliatory tariffs and that nation’s failure to renew establishment registrations for U.S. beef plants and cold storage facilities, the majority of which expired in mid-March. 

April U.S. beef exports of 100,659 metric tons (mt) in April were 10% less than a year earlier, while value fell 8% to $824.5 million, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). For January through April, beef exports were 3% below last year’s pace at 411,027 mt. Export value was down just 1% to $3.35 billion.

Exports to China declined nearly 70% and shipments also trended lower to Mexico, Taiwan and the Middle East. These results were partially offset by larger exports to South Korea, Japan and Central and South America.

“We expected beef shipments to China to hit a wall in April, due to the one-two punch of higher tariffs and expired plant registrations,” says Dan Halstrom, USMEF President and CEO. “We are hopeful that these issues will be resolved soon and are encouraged by this week’s developments on trade negotiations with China. In the meantime, USMEF remains committed to market diversification and we have accelerated efforts to develop alternative destinations for cuts and variety meat items normally shipped to China.”

China’s total duties on U.S. beef peaked in April at 147%. The rate was lowered to 32% on May 14 when the U.S. and China agreed to a temporary de-escalation to allow for further negotiations. (Product that shipped prior to April 10 was allowed to clear without the additional 125%, provided it arrived by May 13.) President Trump spoke with Chinese President Xi Jinping on June 5 and said further talks will be held soon.

April beef exports equated to $396.71 per head of fed slaughter, down 5% from a year ago. The January-April per-head average was still up 1% to $415.16. 

For broader perspective, U.S. pork exports totaled 237,250 mt in April, down 15% from a year ago and the lowest in 10 months. Export value fell 13% to $675.3 million. Exports to China, which are mainly pork variety meats, declined 35% from a year ago.

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