As of late September, Alberta packers were buying fed cattle on a dressed basis at an average price of $390/cwt delivered. Live prices f.o.b. southern Alberta feedlot were quoted in the range of $230-$232/cwt.
Fed cattle prices were relatively unchanged from 30 days earlier. Market-ready supplies are down from a year ago on both sides of the border. At the same time, beef demand during the summer and early fall has been stronger than expected. Strength in the nearby live cattle market along with lower beef production forecasts for the first half of 2024 has driven the feeder market to record highs.
As of late September, larger-frame, higher-quality yearling steers off grass averaging 850 pounds were trading in the range of $315-$325/cwt in central Alberta. The calf market is becoming more defined as the fall run moves into high gear. Mixed steers averaging 500 pounds are readily trading in the range of $415-$425/cwt across the Prairies. Feed barley prices have been under pressure through the harvest period which has contributed to the stronger feeder market.
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Cattle on feed as of Sept. 1 in Alberta and Saskatchewan were 826,316 head, up two per cent from September 1, 2022. The higher on-feed inventory is largely due to the surge in August placements. Feedlot placements in the 700-pound plus categories were up sharply from a year ago. We’ve seen a year-over-year increase in imports from the U.S. These are mostly Holstein feeders. Drier conditions in Alberta and Saskatchewan may have also encouraged ranchers to sell yearlings a month earlier than normal. Total placements during August were 155,405 head, up 73 per cent from August 2022. The year-over-year increase in cattle-on-feed numbers will weigh on the Alberta fed cattle basis during the winter.
Cattle-on-feed inventories in the U.S. were running two to three per cent below year-ago levels during the summer. During the fall and winter, we’re expecting U.S. feedlot inventories to come in four to seven per cent below a year ago. Consecutive year-over-year decreases in the calf crop, along with minor heifer retention, will tighten the feeder cattle supply this fall. U.S. feedlot placements in the final quarter of 2023 are expected to be down eight to 10 per cent from a year ago.
Beef supplies tighten through 2024
U.S. beef production during the first quarter of 2024 is forecasted to be down nearly 500 million pounds from the first quarter of 2023. A year-over-year decline of 400 million pounds in beef production is expected in the second quarter of 2024. The beef supply situation becomes extremely tight during the latter half of 2024.
The beef market is in the process of rationing demand through higher prices. U.S. wholesale choice beef was trading at US$306/cwt during mid-September. This was up 20 per cent or US$51/cwt from a year earlier. U.S. consumer spending at grocery stores during August was up two per cent, while restaurant expenditures were up 10 per cent. U.S. third quarter GDP is expected to come in at four per cent but fourth-quarter growth will likely drop to two per cent. The Canadian economy is bordering on recession. Consumers on both sides of the border will spend less on travel and leisure in the final quarter of 2023 and first half of 2024. This will contribute to lower beef consumption.
The U.S. and Canadian cattle inventory reports showed no sign of herd expansion in the first half of 2023. However, comments from south of the border suggest that ranchers in the major grazing states are starting to hold back heifers. With the Jan. 1, 2024 U.S. Cattle Inventory Report, we’re expecting the heifer replacement data to show a year-over-year increase of 300,000 head. During the initial stage of herd expansion, the feeder market often overextends to the upside. We’re starting to see this price behaviour in the feeder market and a firmer tone is expected this fall. The feeder cattle market is expected to top out in the second quarter of 2024. Keep this in mind.
Lower U.S. beef production in the the first half of 2024 is expected to keep live cattle prices well supported and trending upward. However, Alberta fed cattle basis levels may weaken in the winter due to the larger supplies of market-ready cattle in Alberta and Saskatchewan. The feeder market is expected to trend higher during the fall and prices are expected to peak in March or April of 2024. The feeder market is in the initial stages of herd expansion which can cause the market to overextend to upside.
