Prices wobble at historic highs

Despite the break in Cattle futures at the beginning of August, tied to recession worries and bearish outside markets, bullish supply fundamentals continue for cattle producers.

USDA’s Economic Research Service (ERS) increased expected feeder steer prices (750-800 lbs., Oklahoma City) for the remainder of this year and next, in the July Livestock, Dairy and Poultry Outlook (LDPO). Projected prices increased $6 in the third quarter to $269/cwt. and $5 in the fourth quarter to $268. This year’s annual average price increased $3.54 to $258.50. Forecast prices increased by $4 in the first quarter of next year to $251 and by $4 for the annual 2025 average to $262.50.

“In the first half of 2024, forage conditions have generally improved from a year ago, corn prices are relatively less expensive, and the prospect for higher fed cattle prices this year have supported strong feeder cattle prices…the expected supply for feeder cattle available in second-half 2024 will remain tight, supporting elevated feeder cattle prices,” ERS analysts say. 

The 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. Compared to the previous month, projected prices increased $7 for the third quarter to $190/cwt. and $2 for 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.

All eyes on the consumer

Domestic consumer beef demand continues to underpin the market, despite historically high retail prices.

Although Choice boxed beef prices declined seasonally by 5.4% between Independence Day and the end of July, Derrell Peel, Extension livestock marketing specialist at Oklahoma State University notes in his late-July market comments that they were 3.4% higher year over year.

“In June, the Choice retail price of beef was $8.12 per pound which was 2¢ lower than June 2023. The all-fresh retail price of beef was $8.00 per pound, which was 42¢ more than June 2023,” says Andrew P. Griffith, agricultural economist at the University of Tennessee, in his weekly market comments. “It is clear consumers want and demand beef, but competing meat prices also play a role in what consumers do.”

For instance, Griffith explains the retail pork price in June was 20¢ higher year over year at $4.88 per pound and the retail broiler price was 5¢ higher at $2.01 per pound.

“Given price relativity, the all-fresh retail price of beef is up 5.6% while the pork price only increased 4.2% over the same time period,” Griffith says. “Consumers will consider this price relativity when making purchasing decisions, but it is clear beef is the preferred meat protein.”

Easing overall food price inflation is also supportive.

Although retail food prices rose 0.9% during the first half of this year, it was significantly less than the year-over-year increase of 4.8% at the same time last year and the 1.9% average increase from 2003 to 2022, according to the ERS.

“Compared with recent years, price growth slowed across categories partly because of economy-wide factors, such as reductions in supply chain congestion and softening consumer demand for goods, although price trends differ by food category,” ERS analysts say. “For example, prices for cereals and bakery products showed minimal growth since mid-2023, following strong price increases throughout 2022 and the first half of 2023. In contrast, the midyear inflation rate for meats in 2024 exceeded its growth in the first half of 2023.”

Herd expansion remains stalled

Despite beginning this year with the smallest beef cow herd since 1961 and record cattle prices the last couple of years, Peel states there continues to be little indication of herd expansion.

“Beef cow slaughter is sharply lower, down nearly 16% year over year thus far in 2024,” Peel says in his late-July weekly market comments. “However, that level of beef cow slaughter, combined with the low beef replacement heifer inventory in 2024 implies that the beef cow herd continues to liquidate by another 0.5-1.0% in 2024. Beef cow slaughter would have to drop by roughly 22% year over year to avoid additional liquidation this year.”

The weekly-average percentage of heifers and cows in the slaughter mix during the first half of this year was the third most of the last two decades, according to ERS analysts, in the July LDPO.

Moreover, Peel notes beef replacement heifer inventories in recent years mean that there is no pipeline or momentum for herd expansion compared to previous expansions. He adds the threat of continuing or redeveloping drought is stalling rebuilding efforts.

“The beef cattle industry is smaller than needed and signals for rebuilding will continue and grow in coming months. However, herd rebuilding is likely to be slow to start and proceed quite slowly initially,” Peel says. 

U.S. beef exports strengthen

June exports of U.S. beef reached the highest value in nearly two years, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). 

Beef exports totaled 110,155 metric tons (mt) in June, down 4% from a year ago but the second largest of 2024. Export value reached $938.3 million, up 3% year-over-year and the highest since August 2022. Through the first half of the year, beef export value climbed 5% from a year ago to $5.22 billion, despite a 4% decline in volume (643,733 mt).

“June beef exports performed very well in Japan, which was great to see given the significant headwinds U.S. beef has faced there this year,” says USMEF President and CEO Dan Halstrom. “Export value also rebounded nicely in Korea and shipments to Taiwan and Canada were outstanding. This made for another strong month in terms of export value per head slaughtered, which was nearly $460 in June.”

U.S. beef export value equated to $459.21 per head of fed slaughter in June, up 13% from a year ago. The January-June average of $418.37 per head was 6% more than the first half of 2023.