Cattle Futures Decline Amid Beef Demand Slump and Import Surge

The October cattle futures market has been struggling, closing at its lowest point since December under $214/cwt. Several factors are contributing to this decline, including a drop in beef demand and a surge in imported beef. The Certified Angus Beef company notes that the Choice beef cutout was down 3.3% vs. a year ago in May, while ground beef prices were firm but high-value cuts like loins struggled. Top butt prices, a staple of sirloin steaks, were down 22% in June and 25% in July compared to the same period last year.

The USDA's decision to resume cattle trade with Mexico has also added pressure on feedlots, which currently have significantly more long-fed cattle than they did last year. The supply of cattle that had been on feed for over 150 days was 630,000 head (+22%) higher than a year ago as of August 1. This increased supply may lead to more Mexican feeder cattle becoming available, further adding pressure on feedlots.

Continued gains in corn prices, a benchmark for feed costs, have also weighed on the market. New crop corn futures are well over $5/bushel, a contract high. The Tyson decision to close another major plant has also contributed to the downward trend, with packers looking to reduce capacity to gain leverage.

While President Trump's decision to remove out-of-quo tariffs on 300,000 MT of imported beef may have some impact on prices, it is unlikely to be significant. Imports this year are expected to increase by 750 million pounds, offsetting much of the decline in domestic production and bolstering the overall supply of beef available to the US market.