The US wholesale beef market is experiencing a significant correction, with choice cutout prices falling nearly $9 last week and spot trading indicating further declines of at least $10 this week. Market analysts suggest the decline extends beyond typical seasonal patterns, pointing to fundamental shifts in beef demand.

Demand concerns drive price weakness

Evidence is mounting that fed beef demand has deteriorated even after accounting for seasonal effects, according to LEAP Market Analytics. The decline comes as the summer grilling season ends, with prices retreating from levels that would represent all-time highs outside of the pandemic-disrupted period when plant closures created market distortions.

The pattern is expected to continue for several more weeks, with analysts seeing decent odds for choice cutout prices falling below $350 during Q4. This represents a substantial shift from recent elevated pricing levels.

Supply chain impacts emerge

Packers secured concessions from feedyards last week, with the 5-area average cash price for fed steers dropping below $240 per cwt for the first time since late July. However, beef prices are falling faster than cattle costs, suggesting that any positive margins for packers may be short-lived.

Weekly fed cattle kills continue averaging around 460,000 head during non-holiday weeks, elevated from earlier periods but reflecting market dynamics as processors adjust to demand conditions.

Cattle feeding economics remain supportive

Despite market pressures, cattle feeders maintained positive net returns exceeding $650 per head during August. Their strong financial position helps explain continued demand for replacement cattle, even as model-implied availability shows deficits.

The border situation with Mexico continues to impact cattle supplies, with minimal imports due to containment protocols related to New World Screwworm. This has increased reliance on domestic feeder cattle sources.

Feed costs provide some support

Feedyards are taking advantage of low corn prices, with cash prices likely anchored around $4 per bushel through 2026. USDA’s recent acreage revisions and strong yield expectations are maintaining downward pressure on feed costs, providing some margin relief for cattle operations.

Market outlook suggests continued pressure

LEAP Market Analytics expects August cattle placements at nearly 1.90 million head, down 4.0% from last year, reflecting the higher end of analyst estimates. The fundamental outlook remains cautious, with expectations for increasingly soft beef demand suggesting both fed and feeder cattle markets have more downside potential than futures markets currently reflect.

For procurement managers in the food industry, the current environment presents opportunities for favorable beef pricing, but requires careful monitoring of demand trends and supply chain adjustments.

This article is part of a longer market analysis. For the full market analysis, visit: https://app.vespertool.com/market-analysis/2284