During the last week of October, Alberta packers were buying fed cattle on a dressed basis in the range of $403-$408 per hundredweight ($242-$245/cwt on a live basis). This was unchanged from a month earlier.
Breakeven pen closeouts are in the range of $250-$255/cwt, so margins are in negative territory for the time being. The margin structure doesn’t look much better moving forward with breakeven pen closeouts in the range of $255-$261 for December through March.
Negative margins will weigh on the feeder market moving forward. In late October, late-blooming yearlings straight off grass averaging 900 lbs. were trading for $330-$335/cwt.
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.
This is about $10/cwt higher compared to a month earlier. Calf prices continue to trade near historical highs with quality-genetic 500-lb. steers readily moving through the ring at $465-475/cwt at most sale barns in Western Canada.
In central Alberta, 350-lb. steers reached $600/cwt, which is the highest price I’ve ever heard besides 10-day old dairy cross calves being picked up for $1,000.
Cattle on feed in Alberta and Saskatchewan as of Oct. 1 were at 843,012 head, down nine per cent or 78,378 head from Oct. 1, 2023. Feedlot placements in the two Prairie provinces during September were 238,221 head, down 11 per cent or 29,088 head from 12 months earlier.
There are lower numbers on feed and placements were down from year-ago levels. This sounds positive but it may be misleading for the winter-fed cattle market. It’s important to note that placements over 900 lbs. during September were up nearly 40,000 head from September 2023.
Table: U.S. quarterly beef production, in millions of pounds.
| Quarter | 2021 | 2022 | 2023 | 2024* | 2025* |
| 1 | 6,895 | 7,022 | 6,821 | 6,560 | 6,540 |
| 2 | 6,957 | 7,069 | 6,710 | 6,766 | 6,650 |
| 3 | 6,978 | 7,147 | 6,621 | 6,695 | 6,425 |
| 4 | 7,108 | 7,053 | 6,812 | 6,900 | 6,310 |
| Total | 27,938 | 28,291 | 26,964 | 26,921 | 25,925 |
*= estimates. Source: U.S. Department of Agriculture.
Market-ready fed cattle supplies during December and January will be up about 15,000 head from December 2023 and January 2024. This will cause fed cattle basis depreciation in the Alberta market over the winter, similar to last year. This reinforces the need for feedlots to forward-contract their fed cattle marketings for December through March.
South of the border, a similar situation is developing. As of Oct. 1, U.S. cattle on feed numbers were 11.6 million head, down only 4,000 head from last year. U.S. feedlot placements during September were 2.198 million head, down two per cent or 42,000 head from September 2023. Placements in the top two weight categories were up 20,000 head from year-ago levels. Market-ready fed cattle supplies in the U.S. will actually be up from year-ago levels during the winter months. Fed cattle supplies are not tight. The second factor to consider is that marketing weights are up from 30 lbs. from year-ago levels. Larger supplies and heavier carcasses will result in a year-over-year increase in beef production.
The U.S. feeder market is transitioning from contraction to expansion, which causes prices to reach historical highs and feedlot margins to remain in negative territory for an extended period of time.
The first sign of expansion is the drop in the beef cow slaughter. For 2024, the U.S. beef cow slaughter is expected to finish near 3.02 million head, down 562,000 head from the 2023 total and down one million head from 2022. We’re expecting the Jan. 1, 2025 U.S. and Canadian cattle inventory reports to show a year-over-year increase in heifer retention.
In January and February, we’re expecting feeder cattle prices to trend lower. Fed cattle prices will come under pressure due to the year-over-year increase in market-ready supplies. Seasonally, beef demand drops by about 10 per cent from December to January. The first two months of the calendar year are a period of seasonal low beef demand.
We can also make a case for stronger feed grain prices over the winter. Canadian barley production was estimated at 7.6 million tonnes, down 1.3 million tonnes from last year. The deterioration in feedlot margins will weigh on the feeder market.
U.S. job and wage growth has been a major contributor to economic expansion. Earlier in September, the U.S. Federal Reserve lowered its benchmark interest rate by 50 basis points due to fears of rising unemployment and slower economic growth. We continue to project softer consumer spending over the winter and into next spring. (Editor’s note: this column was written before the Fed’s Nov. 7 announcement of a further 0.25 per cent rate cut.)
There will be lower beef production in the first and second quarters of 2025 but the fed and feeder cattle markets will have difficulty trading higher if consumer spending slows as expected. The economy won’t fall apart but U.S. restaurant and grocery store spending was only up about one per cent from year-ago levels in September. In the spring of 2024, the spending was up six to eight per cent from the same period of 2023. Spending is easing as disposable income evaporates.
Light-weight calves are at extreme highs because of the lower beef production forecast in the final quarter of 2025. The light-weight feeder market is incorporating a risk premium due to the uncertainty in production. The market needs to ration demand.
In conclusion, the fed market is expected to trend lower through the winter due to larger supplies and seasonal low beef demand in January and February. This will weigh on the feeder market. Longer-term, we believe the U.S. economy is vulnerable to weaker consumer spending, which will limit the upside in the fed and feeder market during the spring and summer of 2025.
