A monthly column written for Beef Central by US meat and livestock market commentator Steve Kay, publisher of US Cattle Buyers Weekly

REALITY often tempers optimism in most parts of one’s life. When my newsletter’s website crashed in late January, I hoped a new one would be up and running in about two weeks. It took five weeks and more blood, sweat and tears than I had bargained for.

The year here in the US began with much promise for the beef industry, particularly for cattle producers. Cattle numbers were down and beef demand had remained strong through 2023.

Demand held up for the first two months of this year. But concerns then began to grow that it might weaken as retail beef prices remained high and were set during April. In addition, the front-end supply of cattle in feedlots remained well above last year’s levels.

United States retail beef prices are already well above year ago levels. USDA’s All Fresh beef price in February averaged US$7.83 per pound, up 2c from January and up 8.3pc from February last year. The Choice price averaged US$8.08 per pound, the same as January’s price but up 6.5pc from last year.

In contrast, pork prices averaged US$4.76 per pound, down 0.2pc from last year, and chicken prices averaged US$2.37 per pound, down 2.1pc.

Beef versus the rest, on price

The price divergence between beef and the competing proteins is a red flag for beef demand, say analysts.

But they are even more concerned that wholesale boxed beef prices have not responded to sharply reduced weekly beef production. Beef production for the year to April 6 was down 3.7pc on the same period last year. Total weekly slaughter levels were below 600,000 head for eight weeks until the week before last, when the total was an estimated 613,000 head.

Weekly fed steer and heifer slaughter has been as low as 466,000 head, when it should be 490,000 to 500,000 head. Total slaughter year to date is down 5.4pc. Half of the decline is in fed steers and heifers, the other half in cull cows.

The lack of a recovery in US wholesale beef prices in the light of such reduction begs the question regarding beef demand, says Andrew Gottschalk, HedgersEdge.com: Will it recover post-Easter?

Given that Easter was early this year, several weeks might pass before US seasonal demand improvement can be expected, he says.

Fears over Avian influenza strike cattle futures market

Meanwhile, US cash live cattle prices the last week of March declined for the first time in six weeks. Live prices averaged US$185.73 per cwt and dressed prices averaged US$299.49 per cwt. Prices fell after a big selloff in the futures market because of reports of the highly pathogenic avian influenza (HPAI) that struck a number of dairy herds and resulted in two people contracting the virus.

The reports the following week caused the April live cattle contract on April 1 to plummet 492 points to close at US$180 per cwt, while the June and August contracts lost 492 points and 610 points, respectively.

The irony is that no beef cattle have been found to have contracted the virus. But the futures market operates both on optimism and fear, and clearly did not like what it heard. The April contract closed on March 21 at US$188.37 per cwt, so it had lost 830 points by April 1.

The futures crash meant that cash prices the first week of April fell to US$185.73 per cwt live or US$296.87 per cwt dressed. The large premium between cash and futures prices does not bode well for cash prices the rest of April. The positive basis will favor those with hedged cattle. As in times past, their acceptance of lower cash prices will keep a tight lid on cash prices on the open market.

US cattle feeders certainly won’t gain any respite from the large number of cattle on feed.

Feedlot placements in February were record high for the month. The total of 1.89 million head was 9.7pc above February last year. February marketings at 1.793 million head were down 1.1pc on the previous year after taking one extra slaughter day this February into account.

The March 1 US cattle on feed total of 11.838 million head was up 1.3pc on last year and was 153,000 head higher than a year ago. The April 1 COF total is forecast to be only fractionally lower than the March 1 total.

Ominously, lower than required weekly harvest levels continue to add the marketable front-end fed cattle supply. This loading projects to continue into the late summer, says Gottschalk. The number of cattle on feed 150 days or more on April 1 to September 1 will be up 19.5pc, up 10pc, up 10pc, up 9pc, up 19pc and up 9pc, respectively, on the previous year, he says.

Meanwhile, sharply reduced beef production fails to halt renewed weakness in beef cutout values, as I noted earlier. I cannot recall a time when steer and heifer slaughter was this low, even at this time of the year.

The reason for this, as it has been for weeks, is not a lack of cattle. It is negative packer margins, in part caused by weak beef demand. The start of the US summer grilling season cannot come soon enough.