I often place myself two years in the future, with a view of the past two years.
The old saying is that hindsight is 20/20. Well then, place yourself in the future and look backward. If I were giving a cattle market outlook in March 2026, the summary would be the following:
During 2024, feeder cattle supplies were historically tight, while demand was historically strong.
During 2025, we saw a year-over-year increase in feeder cattle supplies while growth in demand was slowing. Larger supplies and softer demand resulted in a lower price.
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It sounds very simple, doesn’t it? Sometimes, that is how you have to look at markets — especially the cattle market. Cattle producers will often focus on supplies without any regard for the other side of the equation.
The demand curve for beef and cattle has two characteristics. First, a one per cent increase in consumer spending equates to a one per cent increase in beef demand. As a rule of thumb, approximately 70 per cent of U.S. gross domestic product (GDP) is composed of consumer spending. Secondly, beef demand is inelastic. A small change in supply has a large influence on price. In this article, I’ll provide a basis overview of the fundamental situation so producers can plan accordingly.
There was no sign of expansion in 2023, although fed and feeder cattle prices were at or near historical highs. Looking at history, the U.S. and Canadian cow-calf producer needs one year of historically high prices before expansionary behaviour begins.
During 2024, the industry will be contending with a year-over-year decline in the beef cow slaughter and a year-over-year increase in heifer retention. U.S. beef cow numbers were at a historical low on Jan. 1, 2024. We’re expecting to see higher beef cow numbers on Jan. 1, 2025.
The magnitude of the increase is not significant, but it’s important to remember 2024 will be the first major year of heifer retention. The bulk of this heifer retention will likely occur in the spring and then again in the fall period. This will tighten feeder cattle supplies beyond normal fundamentals.
During the first major round of heifer retention, this is when the feeder market usually peaks. Keep this in mind that calf prices will likely make a fresh historical high in the spring of 2024 with yearling prices making historical highs in August or early September 2024.
There is one more factor that is driving the feeder market. The U.S. cow-calf producer marketed feeder cattle sooner than normal over the past 12 months. Without going into detail (see Figure 3), the 2023 calf crop was down 872,000 head from 2022; however, placements during the latter half of 2023 were down only 172,000 head from the same time frame a year earlier. This is something we don’t think the trade is paying attention to, although the calf market has been extremely strong during February and March.
The U.S. calf crop for 2024 is projected to dip to 33.4 million head, down from the 2023 calf crop of 33.6 million head. The pattern for 2023 through 2025 mirrors calendar years 2013 through 2015.
The U.S. economy has been exceeding expectations.
After a robust third and fourth quarter of 2023, recent data has U.S. first-quarter GDP in the range of 3.5 per cent to 4.1 per cent. The Canadian economy has been aided by U.S. growth although Canada’s second- and third-largest trading partners (China and Europe) are struggling.
U.S. economic growth is poised to ease in the latter half of 2024 and experience moderate growth in 2025. Beef demand will remain strong in the first half of 2024 but then ease from August 2024 onward.
If U.S. GDP is not above two per cent, the cattle market has a hard time moving higher, even if supplies are rather snug. U.S. quarterly GDP during 2025 will likely average 1.5 per cent to two per cent. The S&P 500 and the Dow Jones Industrial Index have been trading near all-time record highs in the first quarter of 2024. There is no recession in sight.
In conclusion, the feeder cattle market is expected to make historical highs in the second quarter of 2024. This is when feeder cattle supplies are the tightest and demand is the strongest.
Moving into the third quarter, available supplies will increase while growth in demand starts to ease. In 2025, we’re expecting a year-over-year increase in the U.S. calf crop while demand will likely stagnate or decrease.
The fundamentals are aligning for a very strong feeder market this spring and into summer. Remember, a small change in supply has a large influence on price. Producers need to be aware of this for 2025.
