Bullish market fundamentals continue

Cattle markets were seasonally sluggish in mid-July, but prices remained at or near record-high levels, bolstered by strong domestic consumer beef demand and supply fundamentals. 

Derrell Peel, Extension livestock marketing specialist at Oklahoma State University provided perspective on prices through the first half of 2024, in his early-July market comments. 

“Fed steers averaged $195.81/cwt. (live basis) and 850-pound steers (Med.-Lg. No. 1) averaged $255.41/cwt. in Oklahoma auctions prior to July 4,” according to Peel. “Likewise Boning cull cows (average dressing) averaged $143.22/cwt., with high-dressing Breaker cows averaging $154.41/cwt. Steers calves were priced slightly below the March seasonal peak but averaged $324.53/cwt. before July 4 for 475-pound steers (Med.-Lg. No. 1), down from the $350.85/cwt. March average.” 

More broadly, June’s weighted average five-area direct FOB live steer price was $8.82 higher year over year at $193.33/cwt., according to USDA. The weighted average dressed delivered steer price was $13.04 higher at $307.26 per cwt.

USDA’s Economic Research Service (ERS) raised the expected five-area direct fed steer price for the remainder of this year in the July World Agricultural Supply and Demand Estimates (WASDE). Compared to the previous month, projected prices increased $7 in the third quarter to $190/cwt. and $2 in the fourth quarter to $188, based on recent prices and expectations of firm fed cattle demand. The projected annual average price for this year increased by $2.85 to $186.86. Next year’s annual average price was projected $2 higher at $191 with an average of $188 in the first quarter.

Price expectations increased despite higher forecast beef production. Compared to the previous month, this year’s beef production was projected 65 million pounds more at 26.7 billion pounds with higher expected steer and heifer slaughter more than offsetting reduced cow slaughter. Beef production for next year was projected 100 million pounds more at 25.5 billion pounds based on higher expected steer and heifer slaughter, partially offset by lower cow slaughter. Next year’s estimated beef production would be 1.2 billion pounds less (-4.5%) than this year’s projected total.

On the front side of the gate, USDA’s Economic Research Service (ERS) left projected feeder steer prices (750-800 lbs., Oklahoma City) unchanged, compared to the previous month, in the latest Livestock, Dairy and Poultry Outlook, except for $1 lower in the second and fourth quarters. Average prices were forecast to be $254/cwt. in the second quarter, and $263 in the third and fourth quarters. The annual average price estimate was reduced 50¢ to $254.96. Next year’s annual average price was projected at $258.50 with the first-quarter price at $247.

“Demand for feeder cattle remains steady, supported in part by improved forage and pasture conditions from a year ago across most of the country,” say ERS analysts. “This has enabled cattle to go on grass rather than into feedlots, particularly as feedlots are limiting placements in response to high feeder prices.”

Plus, Peel pointed out strong heifer slaughter so far this year suggests that little, if any, heifer retention for herd rebuilding has begun. 

“Supply fundamentals will continue to tighten for the remainder of the year and beyond,” Peel says. “Beef production will likely finish the year down 3.0-3.5% year over year, less than previously expected due to continued heavy carcass weights. Feedlot inventories and cattle slaughter will continue to decline, perhaps faster if heifer retention begins in a significant way. Barring outside shocks, cattle prices will remain at record levels and push even higher if herd rebuilding begins in the coming months.”  

Feed prices are supportive

USDA’s Acreage report at the end of June surprised the trade, estimating 1.5 million more acres of corn than the initial projection in March’s Prospective Plantings report. The 91.5 million projected corn acres would be 3.2 million acres less (-3%) than last year. Given flooding in parts of the Corn Belt, some believed the estimate was too generous. Estimated area harvested for grain was 83.4 million acres, which would be 4% less year over year.

Between USDA’s estimate of planted area and trend-line yields, Colorado State University agricultural economist Stephen Koontz, says, corn production this year would be about 15 billion bushels. If usage remains steady, he explains the stocks-to-use ratio would increase to more than 16%.

“This level of stocks has not been seen since the 2005-06 crop year,” according to Koontz, in the late-June issue of In the Cattle Markets. “New crop corn futures have fallen to between $4.15-$4.20 and $4 will be pressured if yields are better than the trend, which seems likely, given the rainfall that much of the Corn Belt has seen. The cattle — and every other protein animal — industry is looking at prospects of the lowest feed grain prices in years.”

U.S. beef exports strengthen

U.S. beef export value topped $900 million in May, which was 3% more year over year and the most since June 2023, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). U.S. beef export value equated to $410.94 per head of fed slaughter in May, up 3% from a year ago.

In terms of volume, May beef exports totaled 110,133 metric tons (mt), down 5% from a year ago but the second largest of 2024. 

Exports trended higher year-over-year to Japan, Mexico, the ASEAN Region, the Middle East, the Caribbean and Central America – which included a record month for Guatemala. May export value was also higher for Taiwan. 

For January through May, beef exports followed a similar trend, increasing 5% year-over-year in value to $4.29 billion, despite a 4% decline in volume (533,578 mt). January-May U.S. beef export value equated to $410.40 per head of fed slaughter, which was 5% more than the same period last year. 

“It has been encouraging to see demand stabilize in Japan, where U.S. beef certainly faces significant headwinds,” says USMEF President and CEO Dan Halstrom. “The tourism boom has provided a much-needed lift for Japan’s foodservice sector, and it is a source of optimism for buyers and importers. Taiwan and the ASEAN region were also bright spots for U.S. beef in May, along with Western Hemisphere markets such as Mexico, Guatemala and the Caribbean.”