Market Outlook
Acceleration: Where does it end?By Dennis Smith
The cash steer market is currently in an acceleration phase. Two weeks ago, the week ending just prior to Easter, cash steer prices jumped $10 from the previous week. Last week, the week ending April 11th, cash was up another $3.
The 5-area average sits at $248.38, record high. Front month futures, the April live cattle contract is trading record high for any live cattle contract ever and premium to the cash market.
What the industry is experiencing is difficult for most to comprehend. It’s even difficult for the bullish minded trader to understand. Packers are on the verge of a large increase in seasonal beef demand. No one wants to be caught short of product during the best beef demand timeframe of the entire year.
Cattle numbers are down but cattle weights are up. This means that if a packer misses out on a string of choice heavy weight cattle, it hurts. What do they do? They keep jumping the bid.
For the moment, processing margins don’t matter. Don’t forget that the major packers are highly diversified and capable of absorbing large losses for a sustained period in their beef operations. In other words, don’t get bearish because packers are losing money.
The structure of the futures board is interesting. April futures are premium to cash and premium to all other live cattle contacts. In fact, all contracts are discounted to the front month. April is 200 over June, June is 430 over August, August is 420 over October and October is 100 over December. The futures market is simply unwilling to predict a continuation of record high prices.
This futures structure should encourage a rational cattle industry to aggressively pull cattle ahead of schedule. If this happens, current record heavy weights will start to decline and tighten beef production further.
Production during the first quarter was down 6% versus the first quarter of 2025. Grain fed beef is in very tight supply and this will continue in the months ahead.
Young weaned calves are so valuable that beef cow slaughter is sharply lower this year. Producers desire to get one more calf from that old cow. But with drought persistent in the southern plains, Nebraska and upward into Montana, there’s very little evidence of heifer retention.
In other words, we’re not in the process of expanding the beef herd, yet. This means the tightest supply of beef remains out in front and increased production remains at least two years away.
I predict that the cash highs for the year will be made in the weeks ahead, perhaps in place by the end of May. But how high is high? I’m not willing or able to predict what the top price paid will be. Odds are it will be much higher than anyone expects.
Last fall when I predicted this, I was openly criticized for being “emotional.” Emotion has nothing to do with this, extremely tight supplies of cattle in the face of strong demand has everything to do with this.
Smith publishes his evening livestock wire daily for clients and subscribers. For a free 30-day trial send an email to dennissmith9805@gmail.com.
Smith has been a full service commodity broker specializing in grain and livestock trading for over 30 years.
