Weighing the Market

Wes Ishmael, Southern Livestock Standard

March 18, 2024

Cattle prices crawl higher

Tightening cattle supplies continue to boost cash cattle and futures prices to their highest levels since last fall and the highest of this year. 

USDA’s Economic Research Service (ERS) increased the forecast weighted average five-area direct fed steer price for the remainder of this year, in the March World Agricultural Supply and Demand Estimates.

Compared to the previous month, ERS increased projected prices $3 in the first quarter to $179/cwt., $3 in the second quarter to $183, $2 in the third quarter to $182 and $2 in the fourth quarter to $186. ERS increased the forecast annual average price $3 to $183. Prices were forecast higher on recent prices and firm demand for fed cattle.

Beef production was projected 140 million pounds more than the previous month at 26.3 billion pounds. If so, it would be 638 million pounds less (-2.4%) than last year. Forecast production was raised with higher expected slaughter for the remainder of the year offsetting lower expected production in the first quarter.

Likewise, ERS increased expected feeder steer prices (750-800 lbs., Oklahoma City) for this year, in the February Livestock, Dairy and Poultry Outlook.

Based on prices at the time and lower anticipated feed prices, ERS increased the feeder steer price $9 in the first quarter to $234/cwt., $6 in the second quarter to $242, $5 in the third quarter to $255 and $5 in the fourth quarter to $256. ERS increased the expected annual average price for this year $6.25 to $248.50.

Feedlot inventory remains high

Although supplies are tightening, feedlots and those suppling them continue figuring out how to prop up on-feed numbers. In fact, the feedlot inventory Feb. 1 for feedlots with 1,000 head or more capacity was slightly more than a year earlier. Although 7% less year over year, January feedlot placements were more than expected as high prices and lingering drought impacts continue pushing cattle to market.

Even so, Kenny Burdine, Extension livestock economist at the University of Kentucky notes the on-feed inventory has been decreasing since December. 

“The surprisingly high cattle on feed levels have largely been the result of high placement levels in September and October due to dry weather in some parts of the U.S. and high levels of live cattle imports. In addition to high placements levels last fall, increasing harvest weights in late 2023 also pointed to longer cattle feeding times,” Burdine explains, in an early-March issue of Cattle Market Notes Weekly. “Cattle on feed numbers tend to decrease seasonally through spring and summer. That decrease is likely to be ever greater in 2024 as tighter feeder cattle supplies reach feedlots.”

Beef demand remains strong

Domestic beef consumers continue to prove resilient when it comes to historically high beef prices, though there are signs of wear.

Beef demand was down slightly year over year in 2023, according to the demand index calculated by the Livestock Marketing Information Center (LMIC). However, retail beef demand the last four years was the highest since 2000. 

Although inflation is moderating, Kevin Good, CattleFax vice president of market analysis says domestic consumer demand this year could be pressured by consumer debt and interest rates, cheaper alternative proteins, and economic uncertainty.

Speaking at the recent annual CattleFax Outlook Seminar, Good explained 2024 USDA All-Fresh Retail Beef prices are expected to average $7.90/pound. While higher beef prices may soften consumer purchasing habits, Good predicted the consumer preference for the quality, consistency and safety of U.S. beef will continue to support relatively strong demand. According to Good, premiums for higher quality beef should remain, as consumers have shown a willingness to pay for Choice grade or high-quality beef.

Although U.S. beef export volume is less so far this year, export value increased in January, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF).

January beef exports totaled 99,764 metric tons (mt), down 1% from a year ago. Beef export value climbed 9% to $763.8 million, as value trended higher year-over-year to South Korea, Japan, Mexico, Canada, Central America, the Caribbean and Hong Kong. 

“While USMEF expects 2024 to be another challenging year in terms of beef supply availability, the upward trend in export value is a positive sign,” says Dan Halstrom USMEF president and CEO. “The inventory has been cleared and customers in Asia are reloading on U.S. beef. There is also more optimism in Asia’s foodservice sector, especially in Korea. Combined with the recent strength we’ve seen in the Western Hemisphere, this bodes well for beef demand in the coming year. January was also an excellent month for beef variety meat exports, which are especially important for maximizing the value of every animal.”

Looking way head

Depending on your abacus, USDA’s Agricultural Projections to 2033 are plumb optimistic when it comes to the timing and degree of U.S. beef cow herd growth.

USDA pegs the Jan. 1, 2025 beef cow inventory at 28.82 million head, which would be 600,000 head more than the same time this year. USDA projects the beef cow herd growing to a peak of 31.7 million head in 2031, which would be 3.5 million head more than where this year began.

“Beef production is expected to decline in 2024 reflecting tighter cattle supplies leading into the projection period,” according to the report. “However, higher expected cattle prices in 2024 and an expected return to normal pasture conditions will likely incentivize heifer retention, after which modest herd growth is expected through the end of the projection period.”

USDA projects the annual feeder steer price (750-800 lbs., Oklahoma City) to peak this year at $253.75/cwt. and be at $246.34 next year. After that prices are projected to decline to a low of $159.78 in 2030 before increasing again.

USDA forecasts the weighted average annual five-area direct fed steer price at $185.00 this year and $180.60 next year before declining to a low of $128.78 in 2030. 

U.S. real GDP growth is projected at an annual average of 1.9% during the projection period from 2024–33.

Southern Livestock

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