During the last week of April, Alberta packers were buying fed cattle on a live basis in the range of $256-$258 per hundredweight delivered, up $18/cwt from three weeks earlier. Alberta fed cattle basis levels have strengthened as market-ready supplies tighten.
In Kansas and Texas, live sales, f.o.b. feedlot, were reported at US$182/cwt, down US$3/cwt from 21 days earlier. U.S. fed cattle supplies remain burdensome as packers curtail the slaughter pace to enhance wholesale prices.
Wholesale choice beef prices during April 2024 averaged US$296/cwt, down from the March 2024 value of US$311 and marginally lower than the April 2023 level of US$300/cwt.
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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.
Packing margins have come under pressure; however, beef demand is expected to improve moving forward.
Seasonally, wholesale beef prices tend to trend higher during May and June before peaking in July. This should enhance the slaughter pace and help alleviate the burdensome fed cattle supply situation. The feeder market has divorced from the fed cattle complex and has been percolating higher.
At the time of writing this article in late April, larger-frame tan steers weighing 845 pounds were quoted at $340/cwt in central Alberta while Angus weaned calves at 500 lbs. were valued at $480. Calves under 600 lbs. are incorporating a risk premium due to the uncertainty in beef production in the final quarter of 2024 and first quarter of 2025.
The U.S. February and March slaughter came in lower than anticipated. As of April 1, we estimated market-ready fed cattle supplies were up 350,000 head over April 1, 2023. U.S. steer and heifer carcass weights have been running 25 lbs. above year-ago levels. Cattle that should have been processed in the first quarter have been pushed into the second quarter. U.S. second-quarter beef production (see Table 1) is now expected to finish at 6.75 billion lbs., up 40 million from the second quarter of 2023.
In Western Canada, the buildup of market-ready cattle is slowly being alleviated. While the year-to-date slaughter is running behind last year, fed cattle exports are above year-ago levels.
We’re anticipating that the Alberta slaughter pace increases during the late spring and summer. Carcass weights are declining, and we believe the western Canadian fed cattle supply-and-demand balance was at equilibrium as of April 15.
U.S. feedlot placements during the first quarter of 2024 totaled 5.428 million head, down 218,000 head from the first quarter of 2023. The bulk of the year-over-year decline has been in the weight categories under 900 lbs. This is bullish for feeder cattle under 700 lbs. that will come on the finished market after August 2024. Notice U.S. fourth-quarter beef production is expected to finish near 6.55 billion lbs., down 262 million from the fourth quarter of 2023.
Beef demand makes seasonal highs during July and then tapers off in August. The September through December timeframe will be a unique period. U.S. second-quarter gross domestic product (GDP; see Table 2) is expected to finish near three per cent but then decrease to two per cent in the third quarter. U.S. consumer spending is expected to remain at higher levels through August but then decline in September through December. As a rule of thumb, if U.S. GDP drops under two per cent, the cattle market will trade lower. Keep this in the back of your mind.
The feeder cattle market is expected to be extremely volatile over the next six months. First, the industry is bracing for heifer retention this summer and fall which will lower the feeder cattle supply.
Secondly, this feed grain complex is expected to strengthen due to lower U.S. corn acres. The El Niño phenomenon — while now weakening, with odds favouring La Niña conditions starting later this summer — tends to result in drier conditions in the western Corn Belt.
Finally, if fed cattle prices come under pressure in the final quarter of 2024 due to softer demand, this will spill over into the feeder complex. As it looks now, we’re expecting the feeder market to make seasonal highs in August and early September, then trend lower for the remainder of the year. The feeder cattle highs in late summer could be tempered if drier conditions cause lower corn yields.
Conclusions
The fed and feeder cattle markets are expected to peak in August. Prices will remain firm into September and then start to trend lower. Feeding margins are expected to move into negative territory in the final quarter of 2024 due to stronger feed grain prices and lower beef demand.
Cow-calf producers should try to market their calves earlier in late summer rather than wait until fall. Feedlot operators need to be aware of downside potential in the fed market from September through December. The economy has potential to weaken which will result in a sharp downward slide in fed and feeder cattle prices.
