Cattle futures were challenged in August by skittishness about the domestic economy as investors and traders tried to square prospects of declining interest rates and easing inflation with slower growth. Arguably, though, mostly of the pressure came from all of the non-fundamental reasons money pushes futures prices to and fro. 

As for fundamentals, pressure does come from more beef production relative to declining cattle numbers as feedlots hold cattle longer and heifers continue to comprise more of the on-feed mix than typical.

Inventory-based fed cattle supplies appear rather bearish through the third quarter and then bullish, according to Stephen Koontz, agricultural economist at Colorado State University, in the late-August issue of In the Cattle Markets.

“The weakening feed grain market through this spring and summer incentivized feedlots to grow larger animals – costs of gain were dropping, and prices remained strong. And feedlots responded,” Koontz says. He explains the inventory of cattle on feed more than 150 days was modestly lower in July but still more than the prior four years. He adds cattle on feed more than 120 days was sharply lower. 

Referencing the recent Cattle on Feed report, Koontz also notes July feedlot placements of 1.70 million head — on the top side of expectations — points to market bullishness down the road.

For feedlots with 1,000 head or more capacity, July placements were 94,000 head more (+5.8%) than the previous year, about 2% more than the average of analyst expectations ahead of the report. Cattle on Feed Aug. 1 of 11.1 million head were 31,000 head more (+0.3%) more than the previous year, which was in line with expectations.

Current feedlot inventories mask the continued decline in the domestic feeder cattle inventory, says Derrell Peel, Extension livestock marketing specialist at Oklahoma State University, in his early-September market comments.

This year’s projected total calf crop of 33.12 million head would be 3.22 million head less than the cyclical peak in 2018, according to Peel. He adds this year’s total would be the least since about 1941.

Although the recent USDA Cattle on feed report pegged the August inventory slightly higher year over year, Peel says the 12-month moving average of feedlot inventories peaked in September 2022.

“Total feedlot placements have decreased by 1.3% in the last 12 months compared to the previous 12-month period,” Peel says. “However, in the last year, average feedlot inventories have increased to 11.64 million head. Feedlot inventories have risen countercyclically due to continued feeding of heifers and increased days on feed. Feedlots have slowed the feedlot turnover rate enough to keep average monthly inventories higher despite fewer cattle entering feedlots.”

Prices Ahead

USDA’s Economic Research Service (ERS) lowered the expected third-quarter feeder steer price (750-800 lbs., Oklahoma City) by $2 to $261/cwt. in the August Livestock, Dairy and Poultry Outlook. That was based on recent price weakness. This year’s projected average also declined by $2 to $256.50. However, the estimated fourth-quarter average price of $268 was unchanged, as was next year’s projected average of $262.50.

USDA increased the projected the average five-area direct fed steer price for this year, in the August World Agricultural Supply and Demand Estimates. The increase was based on recent demand for fed cattle that was stronger than expected. Compared to the previous month’s estimates, ERS increased projected prices by $3 in the third quarter to $193/cwt. and by $2 in the fourth quarter to $190 for an annual average of $188.11, which was $1.25 higher. 

This year’s beef production was projected 81 million pounds more than the previous month at 26.7 billion pounds, based on higher steer and heifer and cow slaughter, which more than offset lighter dressed weights.

ERS projected fed steer prices next year at $188 in the first quarter and $190 in the second quarter with an annual average price of $191.

Beef production for 2025 was lowered by 20 million pounds to 25.4 billion pounds, reflecting reduced steer and heifer slaughter in the first quarter. Next year’s projected total would be 1.3 billion pounds less (-4.8%) than this year’s projected total.

Looking further out, the Food and Agricultural Policy Institute (FAPRI) at the University of Missouri forecasts cattle prices to reach a peak next year.

FAPRI’s recent Baseline Update for U.S. Agricultural Markets projects prices for steers (600-650 lbs., Oklahoma City) at an average of $283.70/cwt. this year, rising to $289.65 next year and then declining to $260.77 in 2029.

FAPRI forecasts the five-area direct average fed steer price at $187.95 this year, rising to $191.52 next year and then declining to $260.77 in 2029.

U.S. Beef Export Gain

Exports of U.S. beef continued to build momentum in July, according to data released by USDA and compiled by the U.S. Meat Export Federation (USMEF). 

July beef exports totaled 110,419 metric tons (mt), up 7% from a year ago and the second largest of 2024. Export value climbed 12% to $910.9 million, also the second highest this year. July growth was fueled primarily by strengthening demand in Japan, Taiwan, Mexico and the Middle East and ASEAN regions.

For January through July, beef export value increased 6% from a year ago to $6.13 billion, despite a 2% decline in volume (754,152 mt).

“It is very gratifying to see demand for U.S. beef trending upward in Asian markets, with Japan and Taiwan leading the way and an outstanding showing in the ASEAN region,” says Dan Halstrom, USMEF President and CEO. “U.S. beef has weathered severe headwinds in Asia and especially in Japan, but the outlook for the remainder of the year is encouraging. July was also another impressive month for Mexico, which continues to display excellent demand for an expanding range of U.S. beef cuts and variety meats.”

Compared to the previous quarterly report, USDA’s ERS and Foreign Agricultural Service increased projected U.S. beef export value $300 million higher to $9.4 billion for fiscal year 2024 (FY24), driven by higher unit values and strong demand in Japan, Mexico, and Taiwan.