Cattle updates - Continued restrained supply and bullish prices

Cattle markets remain bullish despite seasonal softening in fed cattle prices in late September. Domestic cattle and beef supplies remain tight and are expected to tighten further in the coming months.

In August, cattle placements were down 10% year over year. While heavier dressed weights, up 24 pounds from the previous year, are partially offsetting lower slaughter levels, beef production has declined 4.3% year-to-date. The threat of New World screwworm (NWS) and declining Brazilian beef imports are expected to further strain U.S. cattle supplies and beef production.

Although the U.S. has not identified any domestic cases, NWS was reported within 70 miles of the U.S. border. This is a troubling development as the disease had previously been confined to southern Mexico. With this case so close to the U.S., a border reopening is unlikely before year end. The continued closure is preventing the import of approximately 100,000 head of feeder cattle from Mexico each month. While the impact is most acutely felt in Texas and other states near the Mexican border, the situation has bullish implications for cattle markets across the U.S.

Beef supplies are also expected to remain tight as Brazilian beef imports, used for ground beef, into the U.S. have dropped significantly. On Aug. 1, a 50% tariff was imposed on Brazilian beef imports. Reports from Brazil estimate this will reduce shipments to the U.S. by 70%. As a major supplier of lower-end beef cuts, Brazil’s reduced presence in the market has forced U.S. processors to source beef from higher-cost suppliers. Coupled with the ongoing reduction in feeder cattle imports from Mexico, the market for both feeder cattle and finished beef products is likely to remain constrained. This tightening supply is expected to drive up both U.S. cattle and beef prices. The key question is whether these higher prices will finally curb domestic beef demand.

Producers within AgWest’s territory have largely benefited from strong cattle prices. Typically, the calf market experiences seasonal lows in the fall as spring-born calves are weaned and enter the market. However, this year, prices across the West remained strong throughout the fall. Currently, western steer calf prices are up more than 40% compared to a year ago. Additionally, there has been a significant rise in direct-to-consumer sales, as many producers are diversifying their operations by setting aside a portion of their own beef for slaughter and selling it directly to the market.

Profitability

Cattle feeders: Profitable - Neutral 12-month outlook
Cow-calf producers Profitable - Bullish 12-month outlook

Despite increased competition for feeder cattle, low feed costs and higher fed cattle prices are projected to support profitability through 2026.

Tight cattle inventories, strong prices, and improved forage conditions support a favorable outlook.