THE cash live cattle and boxed beef markets remain under pressure even though full week slaughter levels are the lowest in many years. As previously noted, February is the weakest demand month of the year. March is the second weakest so cattle and beef prices might show little improvement for another month. Ironically, the February weakness comes after the average retail price of Choice beef set a new record high in January at $8.53 per lb. This was up $0.15 per lb from December and up 5.6% from January 2024. The All Fresh beef price in January averaged $8.15 per lb, up $0.07 per lb from December and up 4.4% from January 2024.
Beef however faces ongoing competition from much cheaper pork and chicken. The average pork price in January was $4.95 per lb, up $0.07 per lb from December and up 3.6% from January 2024. The average chicken price in January was $2.06 per lb, the same as in December but up 3.5% from January 2024. The average price of live cattle, basis western Kansas, in January was $200.95 per cwt live, says HedgersEdge.com. This meant that the ratio of cattle prices to the All Fresh retail beef price was 23.56%. This was up from 22.84% in December, when cattle prices averaged $191.44 per cwt live, and up from 21.44% in January last year when cattle prices averaged $173.22 per cwt live, which was 16.0% below this January’s average price.
Cutouts Continue To Decline
Boxed beef cutout values continue to decline on a weekly and daily basis despite the much-reduced slaughter levels. Last week’s kill was an estimated 563,000 head, following an estimated kill of 561,000 head the prior week. The national comprehensive cutout (cuts, grinds and trim) the week before last averaged $324.40 per cwt, down $5.28 per cwt from the prior week. Spot market sales accounted for 27.6% of the total volume. Formula sales accounted for 54.9%, forward sales 17.5% and export sales 15.1% The daily Choice and Select cutouts continued to slide last week, with the Choice cutout declining $24.07 per cwt in the first four days and the Select cutout declining $3.96 per cwt.
Cash live cattle prices meanwhile moved lower last week for the third week in a row. Very little trade occurred until Thursday. It then picked up, with prices averaging $199-200 per cwt live or $315 per cwt dressed. Prices the week before last averaged $202.91 per cwt live or $320.52 per cwt dressed. These were down $4.14 per cwt and $6.46 per cwt, respectively, from the prior week. The live price though was up 12.5% on the same week last year, while the dressed price was up 11.8%.
Carcass weights were flat in the latest reported week ended February 8 but remained far above year ago levels. Steer weights averaged 951 pounds, down 1 lb on the week before but up 39 lbs on the same week last year. Heifer weights averaged 869 lbs, up 2 lbs from the week before and up 39 lbs on the same week last year. Overall weights averaged 875 lbs, the same as the week before but up 46 lbs on the same week last year. This was the equivalent of adding 32,330 head to that week’s slaughter total of 582,606 head, according to HedgersEdge.com. Weekly cow slaughter meanwhile is running well below last year’s levels, with the first six weeks of kills being down about 15,000 head per week on average. This has caused the price of domestic lean manufacturing beef (90CL) to increase sharply from the start of the year. The average price the week before last was $373.07 per cwt, versus $329.42 per cwt the first week of January This was up 22.8% from the same week last year and was close to the record high of $376.l17 per cwt set the week ended August 3 last year. The price of fatty trimmings(50CL) has increased from $89.57 per cwt in the first week of January to $110.42 per cwt.
INDUSTRY WILL SEE ANOTHER STRONG YEAR
THE U.S. beef industry is poised for another year of strong market performance, driven by tight cattle supplies and robust consumer demand. This comes from CattleFax in its annual market outlook. As the beef cowherd enters a stabilization phase following years of contraction, the resulting supply constraints have shifted market leverage decisively in favor of cattle producers, it says. Weather conditions will remain a critical factor influencing grazing availability, herd expansion and cattle prices. Meteorologist Matt Makens told the annual outlook meeting that La Niña this winter brings rather volatile weather changes across North America, with the majority of weather extremes affecting those in the Central to Eastern U.S. For Mexico and the Southwestern U.S., producers will see drought acreage increase as it has nationwide since June, he said.
Drought will likely increase across the Western U.S. this spring and into the Pacific Northwest, Northern Plains, and Canadian Prairies through this summer, said Makens. To watch will be the North American monsoon and how much drought relief it can provide to Mexico, the Southwest and parts of the Plains. Current data show the monsoon is likely to produce more moisture this year than last. A strong enough monsoon can decrease precipitation across the central Corn Belt, so watch July closely. Late in the year, the focus turns to the development of La Niña or El Niño, he said.
Shifting the discussion to an outlook on the economy, energy and feed grains, Troy Bockelmann, CattleFax director of protein and grain analysis, noted that inflation eased in 2024, ending the year at 2.9%. This was a significant drop from the 9% peak in 2022 but was still above the Federal Reserve’s 2% target. To address this, the Fed cut interest rates three times in the latter half of last year, bringing the Prime bank loan rate to 7.5%. The labor market remained strong, with unemployment briefly rising midyear before falling to 4.1% as job creation outpaced expectations, he said.
Combined with solid consumer spending and wage growth, the U.S. economy is expected to see healthy GDP growth of 2% to 2.5% in 2025, said. Bockelmann. The Federal Reserve’s rate cuts helped stabilize inflation and support economic growth, but inflation is still above target. Despite economic headwinds, consumer confidence and spending have remained resilient. However, lingering inflation and potential trade uncertainties may limit the extent of further interest rate cuts this year and inflation remains a key factor to watch in 2025, he said.
On-Farm Hay Stocks Were Up 6.3%
Bockelmann also noted that national December 1 on-farm hay stocks were up 6.3% from a year ago at 81.5M metric tons (mt), with hay prices averaging $175 per mt in 2024. Corn stocks-to-use at just over 10% should support the spot market towards $5.00 per bushel, with an expected yearly average spot future price of $4.40 per bushel. An increase in corn supply for the new crop year is expected as smaller beginning stocks are offset by larger production levels due to corn regaining acres from soybeans. Stocks-to-use have the potential to be above 13%, which implies a price range of $3.75 to $5.15 per bushel for the 2025 market year, he said. There is a strong correlation between corn stocks-to-use and hay, and CattleFax expects hay prices to follow corn and trend a bit higher in the coming year. On the energy front, not much will change in 2025. Average crude oil prices are expected to be near steady with 2024, although risk remains for a reduced U.S. market share of global product due to potential trade policy impacts. He also expects ethanol production to continue to stay strong, said Bockelmann.
CattleFax expects cow and bull slaughter to continue to decline in 2025, with overall numbers down by about 300,000 head to a total of 5.9M head, said Kevin Good, vice president of market analysis. Feeder cattle and calf supplies outside of feedyards will also shrink by roughly 150,000 head, while cattle on feed inventories are starting the year slightly below 2024 levels at 11.9M head. With a tighter feeder cattle supply, the placement pace will be more constrained, leading to a projected 700,000 head drop in commercial fed cattle slaughter to 24.9M head. After modest growth in 2024, beef production is expected to decline by about 600M lbs to 26.3 billion lbs in 2025, ultimately reducing net beef supply per person by 0.8 lbs, he said.
Retail Beef Prices Will Rise
Beef prices continued their upward trend in 2024, averaging $8.01 per lb, the second highest demand level in history, said Good. While demand may ease slightly in 2025, retail prices are still expected to rise to an average of $8.25 per lb. Wholesale prices will follow suit, with the Choice cutout projected to reach $320 per cwt. Retail and wholesale margins are historically thin, making strong consumer demand essential to maintaining higher price levels. While opportunities for further leverage gains are limited, the market remains favorable for producers, he said.
Inflation remained moderate in 2024 but high consumer debt, elevated interest rates and competition from more affordable protein options could impact purchasing decisions, said Good. However, foodservice demand showed resilience, ending the year stronger as same-store sales and customer traffic improved. Despite economic pressures, consumers continue to pay premiums for higher quality beef. Choice grade or better beef remains in high demand, reinforcing the strength of the premium beef market, he said.
Turning to global protein demand, Good said the outlook for animal proteins remains strong, although U.S. beef exports are projected to decline by 5% in 2025 due to reduced production and higher prices. Conversely, U.S. beef imports are expected to grow as lean beef supplies tighten. The global outlook is currently an interesting scenario as trade policy developments, including potential tariffs, could pose risks to international markets. While growth is expected this year, it may be limited to global competition supply constraints and an uncertain tariff environment, he said.
Mike Murphy, CattleFax chief operating officer, forecast the average 2025 fed steer price at $198 per cwt, up $12 per cwt. from 2024. All cattle classes are expected to trade higher and prices are expected to continue to trend upward, he said. The 800 lb steer price is expected to average $270 per cwt, and the 550 lb steer price is expected to average $340 per cwt. Utility cows are expected to average $140 per cwt, with bred cows at an average of $3200 per cwt. While the cyclical upswing in cattle prices is expected to persist, the industry must prepare for market volatility and potential risks, he said. Producers are encouraged to adopt risk management strategies and closely monitor developments in trade policy, drought conditions and consumer demand. 2025 USDA’s All Fresh retail beef price in 2025 is expected to average $8.25 per lb, which will continue the balancing act for retail between high prices and reduced supply. The key is to avoid setting prices too high, especially in light of competition from more affordable proteins, he said.
Randy Blach, CattleFax CEO, concluded the session with an overall positive outlook. He noted that strong margins in the cow-calf sector have set the stage for cow herd expansion to begin, with heifer retention likely back near a more normal pace relative to minimal retention in recent years. Drought and pasture conditions are now the key factors influencing the rate of expansion, with a slower herd rebuild anticipated compared to the last cycle, he said. This more measured expansion pace implies a positive outlook for producer returns over the next several years. Strong consumer demand also remains a bright spot for the industry. “We have to remember where we came from,” he said. “Continued improvements in quality and meeting consumer expectations with a safe, nutritious product and a consistently good eating experience have had tremendous impacts on moving the needle for the industry. We’re moving in the right direction and we need to keep paying attention to that signal,” he said.
Meanwhile, a new report by Rabobank says a relatively steady U.S. beef cow herd is expected this coming year. Beef replacement heifer numbers on January 1 were relatively steady, with a 46,000 head or 1% year-on-year decline. Cow culling is expected to fall under 10% in 2025. Stronger producer profitability and adequate forage and pasture supplies suggest that heifer retention should improve, and the nation’s beef cow herd is now at a cycle low. Feeder cattle and calf supplies outside feedlots printed 0.6% lower on January 1 at 24.l6M head, suggesting feedlot placements could come under additional pressure as 2025 progresses. Drought remains a focus as winter transitions to spring. The potential for trade disruptions through tariffs remains a concern, says Rabobank. CBW reports further on this topic in its next story.
ANALYST OUTLINES TARIFF IMPLICATIONS
CANADIAN market analyst Kevin Grier warns that the one month reprieve on tariffs does little to change the odds that the tariffs will be imposed. Industry participants in Canada and the U.S. should anticipate that there will be tariffs in March. The following are key factors for consideration, he says. One quarter of all Canadian beef production goes to the U.S. Net exports to the U.S. after U.S. imports to Canada amount to 20% of Canadian production. A total of 780,000 cattle moved from Canada to the U.S. last year, according to USDA. About 80% or 615,000 head were fed or non-fed cattle for immediate slaughter, the rest were feeder cattle. The slaughter cattle exports represent about 16% of total Canadian slaughter cattle sales, he says.
The U.S. represents about 15% of Canadian fed cattle marketings, says Grier. Canadian cattle are very important to plants such as JBS Hyrum, Utah, and Souderton, Penn., as well as Agri Beef in Yakima, Wash., and Jerome, Idaho, and Tyson Foods in Pasco, Wash. Long Prairie Packing in Minnesota also augments its kill with Canadian dairy culls, he says.
Canadian cattle can represent up to 30% of the kill in some of these plants, depending on the time of year, says Grier. No matter how important Canadian cattle are to these U.S. plants, it will be difficult to ask packers to pony up an additional $750 per head when they are already losing nearly $200 per head. In fact, given margins now, they might not mind having fewer cattle to process, he says.
This all means there could be an extra 400,000 fed cattle or 8000 to 9000 head per week looking for a plant in Canada, says Grier. In Canada, it is easy to see how the big two packers will sharply cut production. They are not going to suddenly find better markets for 20% of their production. Four-day or even three-day weeks are foreseeable for as long as the tariffs last. This happens at a time of cattle not being wanted in the U.S. due to the tariff, says Grier.
Grier Summarizes U.S. Market
Grier also outlines summary points for the U.S. market in his latest newsletter, Canadian Cattle Market Report. The February live cattle futures market undertone is weak, he says. The fed cattle basis is sending a strong sell signal. Calf prices are succumbing to the threat of higher grain prices and the weaker fed cattle market. The Choice beef cutout has fallen off its very high perch but remains high. Packer margins are deep in the red. Consumer demand in December was very strong, he says.
Total slaughter for the four week average ending February 5 was down 5% versus. last year, says Grier. Fed cattle slaughter for the four weeks ending February 1 versus 2024 was up 2%. Non-fed slaughter for the four weeks ending February 1 was down 11%. March, April and May should see fed kills steady with last year. Packer spot market inventories look tight as packers are more comfortable with contracts than last year, he says.
Rabobank in its report cited in the previous story notes the potential for trade disruptions through tariffs. The U.S. is a net importer of beef and cattle from the other North American countries and a net exporter of pork and poultry. Mexico’s beef and cattle exports created an estimated 1.8 billion lbs of beef in the U.S. in 2024, while Canadian beef and cattle exports were responsible for more than 1.7 billion lbs. Conversely, U.S. beef and cattle exports to Canada and Mexico were the equivalent of around 890M lbs of beef last year. Rabobank expects news surrounding trade disruptions to add volatility to the North American markets this year, it says.
Nearly all classes of North American cattle are trading at record high prices, says Rabobank. Tighter cattle supplies and stronger demand are supporting prices in early 2025. New annual average highs are expected this year, as been demand growth is met with tighter domestic and global beef supplies, it says.