The prices for live cattle futures contracts continue to rise as records are broken.
This should continue for several more weeks, says Stephen R. Koontz, an ag economist with Colorado State University.
“Fed cattle markets have moved into and through April on a very strong upward trajectory,” he says in his In the Cattle Markets column.
“The prior high in the live cattle futures market of $172.75 established in November 2014 was broken. The April 2023 live cattle contract will likely settle above the prior record high, and the deferred contracts expiring in February, April and June of 2024 are currently trading above the prior record. These prices are clearly communicating the current strong demand and anticipated tighter future supplies.”
Koontz says cash prices are moving right along with futures prices.
He says while feeder cattle futures prices remain strong, those prices have not set records due to limited forage availability and higher grain prices.
The cash market is moving with futures, and basis is even-to-modestly weak except for cattle grading over 80% Choice — basis for the highest- quality grade cattle is very strong.
“Nearby contracts are trading above $200/cwt. and deferred contracts into 2024 are around $230/cwt.,” Koontz says, adding the market is “again anticipating tighter supplies and moderating feed market prices. The cash market is also moving with futures, with the strongest basis in the smallest calves reflecting that likelihood of lower costs of gain.”
All of this is happening despite no apparent growth in the breeding herd, he says.
“Heifers are a strong proportion of the FI slaughter mix, and beef cow slaughter continues at a strong pace,” Koontz says. “The unsaid conclusion is that better cattle prices are yet to come. I believe the continued rally is unlikely for the remainder or even a portion of the year.
Koontz says markets have been “unique” over the past two years, as “supply and demand — and market fundamentals in general — have routinely taken a bit of a hiatus.
“Beef production peaked in 2022 and yet retail and wholesale prices were some of the largest,” he says. “The shocks to the meat supply chain have had an impact, as have the fiscal stimulus, and both are moderating. Net beef exports have been reasonably strong and unlikely to continue to be so in an elevated price environment.”
