After writing an article for AuctionsPlus on assessing the value of weaners sold last week, there was some reader feedback around being too ‘wishy washy’ with price forecasts. This is understandable as the article was a very basic look at possible scenarios. Here we take a less ‘wishy washy’ look at future pricing for feeder cattle.
The main argument for higher prices is the record cattle pricing being seen in the USA. Back before Christmas, we outlined what is happening with the US herd, and how tight supply is driving both cattle and beef prices to record highs in the US.
Figure 1 shows that US Feeder Cattle Futures have opened 2025 by rising to record highs. The weaker Australian dollar over the last six months has helped push US prices in our terms to an extraordinary 1763¢/kg cwt. The premium of US Feeder Cattle Futures to the Eastern Young Cattle Indicator (EYCI) is just over 150%.
Interestingly, we are not at record levels for the US Feeder premium over the EYCI. In October 2023 US Feeders were 300% stronger than the EYCI, and during 2015 it was around 170%.
Unfortunately, it’s not possible for Australian feeder cattle to be sold into the US market to realise the record prices. Australian feeders need to go through the supply chain and be turned into grain-fed beef before they can be sold in the US, Japan or Korea, where Australian beef competes with US beef.
With the Australian cattle herd estimated to be at a six-year high, and slaughter capacity being something which is hard to increase quickly, it is processing bottlenecks relative to supply which are keeping a lid on Australian prices.
We can see in Figure 1 that the last two times US Feeders have been at strong premiums to Australian values, markets have eventually converged through our prices rising and US prices falling. The last two times were also coming out of drought situations, with our herd going into a rebuild.
This time we are looking at a peak herd, and the recently released survey data suggests the herd might keep growing, albeit at a slower rate. Increasing supply is not a recipe for rapid price shifts higher.
Finally, we can now again see what the market thinks feeder prices will do in the future. StoneX are running a feeder cattle swap book, and Figure 2 shows how prices going forward compare to the recent past. The swap values are the mid-point and were updated to the 20th of January.
The flat nature of the feeder swap forward curve suggests that buyers are not concerned about prices rising. Towards the back-end of 2025 bids are at 350 and offers at 390, so buyers and sellers are in some disagreement, but they are not far from current values.
What does it mean?
Anyone who has used grain futures knows that the forward market is rarely correct, but it does tell us what the major players think. Steady feeder values for the rest of the year fit nicely with the strong supply and limited processing capacity story. Yes, US values are at record levels, but we need cattle supply to tighten to realise major gains.
Key Points
- US Cattle Futures have hit record highs in early 2025 and are at extreme premiums to the EYCI.
- Processing bottlenecks are limiting access to higher prices for Australian cattle.
- Forward markets suggest steady prices for the coming year.
Click on figure to expand
Click on figure to expand
Data sources: MLA, CME, StoneX, Mecardo
