Live cattle futures surpassed the historic $250 mark on Tuesday, driven by record-breaking $250 cash trades in the North and a 75-year low in U.S. cattle inventory. Despite geopolitical tensions and higher fuel costs, robust consumer demand and a lack of Mexican imports continue to push both fed and feeder cattle to all-time highs as the industry enters the peak spring grilling season.
After the correction off of record highs late last year — triggered by President Trump posting he wanted to lower beef prices — some market watchers were unsure the market would retest those levels. However, live cattle futures hit all-time highs on Tuesday, exceeding last October’s record prices, while feeder cattle made new contract highs.
Record Cash Driving Futures
The spot month (April) live cattle futures contract moved above the psychological $250 mark this week, hitting a new high of $253.60 on Tuesday, while June hit a contract high at $252. The futures were pushed by the recovery in the equity markets, but more importantly, they were chasing the fed cash trade. Last week’s 5-area weighted average steer price hit a record $248.38, up $3.42 from the previous week.
Brad Kooima, of Kooima Kooima Varilek, says although it was on light volume, the North led the cash trade with live sales hitting an eye-popping $250 for the first time ever.
“Some of us got $250 in the North to a regional packer. It wasn’t widespread at all. None of the majors ever bid it,” he explains. “The rest of the feedlots were more like $248, and so most everybody passed. Then there was a little bit of trade in Kansas Friday at $249. And then it was kind of unusual, but there was some trade in Texas on Saturday at $248.”
The previous cash record for the 5-area weighted steer was $246.91, scored the week of Feb. 23.
Higher Fed Cash Cattle Trade This Week
Even after these lofty levels, Kooima says he believes fed cash trade could keep climbing this week as tight supplies continue to support the market.
“The feedlot has still maintained leverage. So, I think there’s a shot we’ll be a little bit higher — let’s go $252,” he says. “I don’t know. Maybe that’s a little bit optimistic, but I’ll take my shot that we’re going to be a little bit better, but it won’t happen until late in the week.”
His optimism is based on beef packers buying very few cattle last week and with feedlots holding out for higher money due to tight breakevens.
“I still think we’re in a window of time here of 30 to 45 days where we are cleaning up the old-crop yearlings. You know there’s a few big cattle, but we don’t have the weight problem that we had three to four weeks ago as you’re going into the front end of these calves that aren’t hardly fat. I just don’t think that the feedlot’s going to have any urgency at all to sell as these cattle.”
Futures Continue to Make New Contract Highs
With higher cash trade, Kooima expects the futures to remain resilient, even in the face of the Iran War, higher gas prices and equity market corrections. Additionally, speculative “fund” traders have returned as aggressive buyers.
“There’s an end to that game. However, in the meanwhile, the holding action rally that we’re experiencing, I expect, is going to continue for a little while yet,” he adds.
The 14-Minute Metric: Why Consumers Aren’t Feeling “Sticker Shock”
Supply is only one-half of the equation, as the strength in consumer demand cannot be underestimated as the market enters the peak grilling season.
“It begins with buying for Mother’s Day,” Kooima explains. “So let’s hope that we’ve energized the Choice cutouts, that we see the middles, you know, the steak cuts lead us out of here.”
Kevin Good, vice president with CattleFax, says the rally the last couple of years has been driven by beef demand, which is at a 40-year high. He concludes there is no evidence of sticker shock.
“Even though we’re at a price point where we’re a little concerned we might have some consumer pushback,” he explains. “If we look at how many minutes it takes to buy a pound of beef and at 14 minutes it is back to the level we were at the last cycle peak in 2014 to 2015. So if we put that into perspective, the consumer is saying for that eating experience we’re still a bargain.”
Feeder Frenzy: The Impact of the 1.2 Million Head Border Gap
The feeder cattle futures also reached new contract highs on Tuesday with the May contract topping at $377.57 1/2. That market has also been pushed by the 75-year low in the cattle herd, plus the lack of Mexican feeder cattle imports has further tightened supplies.
The Southern border has been closed for the last year to prevent the introduction of New World screwworm (NWS), resulting in 1.2 million head fewer feeder cattle being placed in southern feedlots. The feeder cattle cash index is reflecting the tight inventory and the red-hot prices at auction barns across the country. The index was up $7.27 on Tuesday at $373.94.
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