Market Outlook
To infinity and beyond!By David Anderson
Buzz Lightyear’s signature phrase from Toy Story might be an apt description for the cattle market lately. Calf and cattle prices have been in record territory in recent weeks and they have not shown much in the way of slowing down.
PricesAcross the board, cattle and calf prices have been increasing all year. In the Southern Plains 400-500 pound steers hit of $370 per hundredweight in late March, up more than $100 per cwt compared to last March. Lighter weight calves are already over $400 per cwt. in local auction markets.
Across those same Southern Plains markets 500-600 pound and 700-800 pound steers are over $330 and $260, respectively. Fed cattle prices continue higher with the five-market average at $189.56 during the last week of March. That is up over $20 per cwt compared to this time last year and up from $174 in early January.
Cull cow prices are higher also, with some dramatic swings in auction markets. Weekly average prices have bounced from $85 to $105, back to $85, and up to $125 per cwt at the end of March. Even though there has been some volatility prices have been almost 50% higher than last year.
Prices are higher due to fewer cows headed to slaughter. Beef cow slaughter totaled 53,000 head for the last full week of March, the smallest non-holiday week in a number of years. Dairy cow slaughter is also declining, with March slaughter down about 12% from last year. Both beef and dairy cow culling are down more than 10% from last year.
Reduced cow-beef supplies are happening as grilling season demand for ground beef is ramping up. Ninety percent lean, fresh beef increased to $339 per cwt at the end of March, up 35% since the beginning of the year. Cull cow prices and lean beef for ground beef ought to continue to increase seasonally for some weeks to come.
Price spreads continue to widen, whether from calves to feeders, feeders to feds, or feds to the cutout. Widening spreads will indicate pressure on profits in some segments, for example packers and feeders. A simple price spread calculation between feeder cattle and fed cattle indicates a historically large spread of over $77 per cwt. Last year at this time it was about $28 per cwt and $19 per cwt as an average of the last five years.
This simple spread has been increasing, counter-cyclically, this year. Its normal for these spreads to widen in times of tight supplies like this. But, historically wide spreads are hard to maintain and might suggest some correction will happen.
High U.S. beef prices are having an impact on international beef trade, encouraging U.S. beef imports and discouraging exports. U.S. beef imports hit a record volume in 2023 as high domestic beef prices drew in more beef. The largest share of our imports are lean beef trimmings for ground beef production. Declining cow numbers and reduced lean beef production means higher prices and more imports.
As high beef prices pressure exports, U.S. net beef imports, or imports minus exports, have grown sharply, hitting 271 million pounds in January. In comparison, net beef imports last January were 122 million pounds. An average over the last five years indicates that net beef imports were only 11 million pounds. So, net trade added an extra 150 million pounds of beef on our market in January. Imports should continue to exceed exports throughout this year, with import amounts setting a new record high in 2024.
What to watchWith all the great news for prices there are some other things in the cattle market worth watching in coming weeks. We are moving into grilling season and close to purchases for the first big summer holiday, Memorial Day. Watch the cutout and, especially, middle meats and ground beef. A good indicator of beef demand will be seasonally rising cutout values over the next few weeks.
USDA’s next cattle on feed report will have the quarterly estimate for the number of heifers on feed. That will be interesting to see if the number of heifers decline over a year ago, especially in the face of more cattle on feed. There will likely be more talk about cow plants struggling to find cows and going further away to find them. Fewer cows will pressure cow plants.
Beef imports and exports will be interesting too as high beef prices here boost imports and reduce exports. Fed cattle dressed weights will also be interesting in that they are increasing sharply, counter seasonally, as cattle stay on feed longer with better performance.
The funny part about Buzz Lightyear is that, of course, nothing goes to infinity and as one of my old economics professors used to say “trees don’t grow to the sky” meaning that nothing goes up forever. But, for cattle prices declining beef supplies are going to be with us for the next several years keeping upward pressure on prices until the profits are there to expand.
Anderson is a professor and Extension economist for livestock and food product marketing in the Department of Agricultural Economics at Texas A&M University.
