The cash steer market peaked last fall at $1.85/lb. on November 1 in the Southern Plains. Last week, cash steer prices traded from $1.83/lb.-$1.86/lb. in the south. Prices in the North were stronger, edging up to $1.88/lb. tops in Nebraska and $1.895/lb. for a top in Iowa. Dressed trade was reported at $298.00/cwt. with unconfirmed reports of trade as high as $300.00/cwt.

For the third consecutive week, packers have been holding the kill below 600,000, and in collusion, all been trying to break the cash steer market. It has not worked. Cash has edged higher over the last three weeks.

The calendar rolls on. We’re entering the third week of March and Easter is early this year, occurring on the last day of the month. The Lenten season is a poor timeframe for beef demand. The following eight to ten weeks will be the best time of year for beef demand. Seasonal beef demand is due to kick in any minute and it will last through May. When this improved demand hits the market, wholesale beef prices will shoot higher. Currently choice beef is quoted just above $310.00/cwt. By Memorial Day, my sources believe choice beef will be trading close to $350.00/cwt. if not higher.

The leverage is slipping away from the packer and toward the feedlot. In my opinion, when seasonal demand hits the market, and beef accelerates higher, packers will completely lose their grip and be forced to chase to compete fiercely for slaughter inventory. Simply put, if they don’t compete, they’ll lose market share.

When running a beef slaughter plant with high fixed costs, the last thing they want to have happen is losing market share. On Jan 1, the industry had more than one million less feeders to place this year compared to last year. The supply of feeders outside feedyards is record small. It’s mathematically impossible to place more animals this year. On-feed inventory will tighten during the year, and packers know this. But how high is high?

It’s also my opinion that live cattle cash prices and futures prices will rise further than everyone believes possible. Our clients have been accumulating the August live cattle $2.05 calls. I’m projecting that cash steer prices will trade north of $200/cwt. before the June contract goes off the board.

The bearish traders are focused on three things:

At some point, but perhaps not this year, bearish factor number three will come into play. Indeed, as beef production continues to decline, the function of the market will be to ration the tight supply. Markets do this through higher prices. Eventually beef will be priced so high that many consumers will back away from the beef counter. Anticipate lower beef production this year, next year and most likely again in 2026. During this period, high beef prices will become the new norm. In my opinion, wholesale beef prices, cash steer prices and live cattle futures will be substantially higher than current levels during most of this period.Dennis Smith publishes his widely followed evening livestock wire daily for clients and subscribers. For a free 30-day trial to this information flow, send an email to [email protected]