Consumer beef demand underpins cattle prices

Choice boxed beef cutout values were on a tear through most of October as packers reduced production and consumers continued to buy more beef year over year at higher prices. Wholesale Choice beef prices reached $323.50/cwt. on Oct. 28, which was $11.04 higher than the most recent low in July.

At the time, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University explained in his weekly market comments, “The weekly Choice boxed beef price is also at the highest level since July and has averaged 2.2% higher year over year and a record high for the year-to-date … The increase in boxed beef prices is perhaps even more surprising in the face of increased fed beef production.” 

Year-to-date estimated total cattle slaughter of 26.4 million head the week ending Nov. 1 was 1.0 million fewer (-3.8%) than the same period last year. Estimated year-to-date beef production of 22.3 billion pounds was 140.2 million pounds less (-0.6%).

Feedlots continue to pull available cattle forward, as evidenced by monthly feedlot placements that continue to be more than expected. For instance, feedlots with 1,000 head or more capacity placed 2.2 million head in September, which was 42,000 head less (-1.9%) year over year but 2.3% more than expectations ahead of the report. Sooner than later, though, dwindling cattle numbers will push placements lower.

“It is well documented that fewer cows were in the herd, which means fewer calves available for stocker, backgrounding, and feedlot operations,” Andrew P. Griffith, agricultural economist at the University explained in his mid-October market comments. “This known information has been masked to some degree as feeder cattle have continued making their way to the feedlot due to heifers not being retained and strong beef production from growing cattle larger in the feedlot.”

USDA’s Economic Research Service (ERS) increased the expected five-area average direct fed steer price for the remainder of this year and the beginning of next year, in the October World Agricultural Supply and Demand Estimates (WASDE). That was based on prices in September and expectations of continued strong demand for fed cattle.

Compared to the previous month’s projection the ERS increased the five-area price by $1.26 in the third quarter to $189.26 and by $3 in the fourth quarter to $186 for an annual average price of $186.18, which was $1.07 higher.

Projected prices for next year increased by $1 in the first quarter to $187. The projected annual 2025 price also increased by $1 to $187.

Herd expansion further ahead

Continued large inventories of heifers on feed confirm that little or no heifer retention is starting in 2024, according to Peel.

“Heifer slaughter is down 1.7% year over year thus far in 2024,” Peel says.  “Heifer slaughter would have to drop significantly more if heifers were being retained for breeding. In the most recent beef herd expansion, heifer slaughter decreased an average of just over 10% each year in 2014 and 2015.”

The quarterly inventory of heifers on feed was 4.6 million head, down 0.9% year over year. Heifers made up 39.7% of the total feedlot inventory on October 1, up slightly from the 39.6% in July.  

Heifers have averaged 39.5% of total feedlot inventories for the past 10 quarters, since July 2022, and have been above the 15-year average of 36.9% since October 2018, according to Peel.

In fact, continued areas of dryness likely will delay market-relevant, nationwide beef cow herd expansion until at least the summer of 2026, says Glynn Tonsor, agricultural economist at Kansas State University, in a recent issue of In the Cattle Markets.

“Moreover, while market-reported dollar-per-cow returns in 2024 are slated to be attractive for many producers, when put on an inflation-adjusted basis, they have yet to exceed the memorable year of 2014,” Tonsor explains. “Likewise, when one moves beyond a dollars-per-cow approach to investment and decision-making, framing around percentage returns (ROI, return-on-investment percentage), reflecting elevated capital necessary to operate, then attraction in expansion may be further tempered. While, on balance, I do envision heifer retention will occur nationally, starting in 2026 at the earliest, there indeed are multiple reasons ‘typical’ producers are being rational in not yet pulling the herd expansion trigger. Implications clearly follow for calf crop size and industry capacity utilization discussions to continue as well.”

In the meantime, cash calf and feeder cattle prices continue near historic highs. Even so, based on relatively lower price levels in preceding weeks, the ERS reduced the projected fourth-quarter feeder steer price (750-800 lbs., Oklahoma City) in the October Livestock, Dairy and Poultry Outlook. Compared to the previous month, the ERS reduced the forecast fourth-quarter price by $2 to $253/cwt. and the annual average price by 41¢ to $250.59.

Projected feeder steer prices for 2025 were unchanged at $248 in the first quarter, $254 in the Second quarter and $263 in the third quarter with an annual average price of $258.75.

USDA pegged the season average corn price at $4.10 per bushel in the October WASDE.

U.S. beef exports lose steam

U.S. beef exports weakened toward the end of summer, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

Beef exports in August totaled 102,682 metric tons (mt), down 6% from a year earlier and the lowest since January. Export value fell 4% to $845.9 million. Through the first eight months of the year, beef exports were 3% below last year at 856,834 mt but were 4% higher in value at just under $7 billion.

“Beef demand in our major Asian markets seemed to lose a bit of momentum in August, but exports held up well to Mexico, Taiwan and the Middle East,” says Dan Halstrom, USMEF president and CEO. “The headwinds in Asia remain formidable, but we are encouraged by the region’s ongoing tourism rebound. The late-September removal of Colombia’s restrictions on U.S. beef is also a positive development. While this came too late to impact the August results, it will help bolster fourth-quarter demand in Latin America.”

U.S. beef export value equated to $391.19 per head of fed slaughter in August, down 1% from a year ago. The January-August average was $414.88 per head, up 5%.