The beef market appears to have made a seasonal high during the first week of July.
Wholesale choice beef prices reached up to US$329/cwt during the week ending July 6 before fading to US$319/cwt during the third week of July. Weaker wholesale values have resulted in lower U.S. fed cattle values.
During the first week of July, fed cattle prices in Kansas were quoted at US$190/cwt while values in Iowa topped out at US$198/cwt. During the middle of July, Kansas prices were at $188/cwt and the Iowa market was quoted at US$190/cwt. The Alberta fed market has been rather flat due to the recent strike at the Cargill plant in Guelph. Alberta feedlots have been selling cattle on a live basis in the range of $255-$257/cwt, f.o.b. feedlot.
Read Also
Beef demand drives cattle and beef markets higher
Prices for beef cattle continue to be strong across the beef value chain, although feedlot profitability could be challenging by the end of 2025, analyst Jerry Klassen says.
That plant strike in Ontario kept the Alberta market relatively flat through the summer as cattle from Eastern Canada travelled west. It will take a couple of months to clean up the backlog in Ontario. While fed cattle prices are grinding lower, the feeder market has held value. Steers off grass averaging 1,000 pounds are expected to trade at $320/cwt during August. These cattle don’t pencil out, given the deferred live cattle futures, and there is serious downside risk to the fed and feeder cattle markets moving forward.
Beef demand tends to make seasonal highs early in summer, then softens throughout the fall. Wholesale beef prices peaked in early July and are expected to trend lower throughout the fall and early winter. This price pattern coincides with restaurant spending.
Secondly, restaurant traffic was running slightly above year-ago levels during May and June. However, this pattern has reversed in July and we now see traffic lagging year-ago levels. U.S. and Canadian consumers are pulling in the reins on spending. This is the first signal that the beef and cattle markets are turning.
As of July 1, U.S. market-ready fed cattle supplies were up sharply. The lower slaughter pace caused feedlots to become backed up with market-ready cattle. Carcass weights were up 30-35 lbs. from year-ago levels. Despite the lower slaughter, beef production was higher than expected. As the wholesale market was trading higher, feedlot operators could hold out for higher values, but this environment has now changed. Fed cattle supplies are above year-ago levels and beef demand is trending lower. Larger fed cattle supplies and lower demand result in a lower price.
In Western Canada, the industry was bracing for a significant fed cattle deficit during the summer. Earlier in spring, Alberta fed cattle prices were premium to the U.S. market. This changed once cattle numbers started to build in Ontario.
The supply and demand in Alberta balanced out during June and will stay at equilibrium during late summer and fall. The Alberta basis has moved back to average levels and the overall cash price will move in tandem with the U.S. market for the remainder of 2024.
The feeder market is functioning to ration demand. During the spring of 2024, feeder cattle prices were up 25 per cent from year-ago levels while fed cattle prices were only up about five per cent. This is partially due to weaker feed grain prices but also due to the year-over-year decline in feeder cattle numbers.
I’m forecasting western Canadian feeder cattle number outside finishing feedlots as of July 1 to come in at 3.698 million head, down 189,200 head from July 1, 2023. The imports and exports of feeder cattle are similar to year-ago levels.
Feedlot placements in Alberta and Saskatchewan are also relatively unchanged from last year. Therefore, the year-over-year decline in the feeder cattle supply is largely due to the lower 2023 and 2024 calf crops. U.S. feeder cattle supplies outside finishing feedlots as of July 1 are estimated at 33.7 million head, down 700,000 head from 12 months earlier.
There is potential that feedlot margins remain underwater for about 12-18 months. Feeder cattle prices tend to lag the fed cattle market by six months. The feeder market is expected to soften later in fall, then trend lower during the winter and spring of 2025. Cow-calf producers and backgrounders need to make sure they have their price insurance or risk management in place.
I’ve included a chart of U.S. wholesale choice beef prices. The market reached seasonal highs in early July, similar to last year. It’s important to realize wholesale choice beef prices are expected to trend in line with year-ago levels from September through December. This will set a negative tone for fed cattle and spill-over into the feeder complex.
