Beef Market Update: Holding back heifers, feeder numbers, and supply pressure in the year ahead

This episode of the Beef Market Update is brought to you by Bright Young get the mix they love most. Talk to your retailer about Bright Young's forage seed options for a happy, healthy herd. Shaun haney here with RealAgriculture.com and it's time for another episode of the Beef Market Update with Ann Wasco, the Gateway Livestock Exchange. Ann, it is great to talk to you again and Happy New Year. Happy New Year to you. Wow, what a, what a great year we've had. And we're going to talk about 26. Yeah, we are. You know, 25 was a wild ride, I guess, you know, with my uneducated guess would be that 2026 is going to present some of the same opportunities and challenges and we'll probably look back on it as a wild ride as well as we do our 2026. Look ahead here. What are some of the things that stick out to you in, in, in terms of things that are, are really going to grab the headlines? Well, I think you've kind of already touched on one, Shaun, that I wanted to make sure we don't forget about when we get to these cycle tops or bottoms. But in this case cycle highs, we get lots of volatility. So I don't even though we've got, you know, wonderful record high prices, I think as we head into 26, we're going to find that when you've got prices at these levels, you're going to get lots of volatility. So first of all, lots of volatility right off the bat, you know, such a big factor in 25 that we still are dealing with in 26 is that US Mexican border closed for feeder cattle coming into the US and that's huge because that's, you know, over a million head of, of typical capacity that would fill into southern US Feed yards. So the feeling out there, and I don't have any, any more information than, than other media, but is it at some point this year, I think we'll get it opening. So it depends on when that happens, how it happens, you know, our cattle coming in very slowly in one or two ports or is it, you know, just how does that all work? Because those cattle will add to the supply for 26. Yeah. And on that note, you know, I think one of the times, some of the times we talk about this, it's about, you know, the whole border opening. I'm always, I am a little bit curious if we do see a bit of a regional opening in, in terms of, you know, certain counties. And it's kind of a slow start in sort of watch it from over a longer term and see what happens. We'll have to watch and see something this. There could, this could happen in January and some are saying, you know, it's going to be not till month 7, 8, 9 in the year. Right. So when that happens and how it happens plays hugely into what's going to happen with US Feeder cattle markets. And we know here in Canada that's going to impact and imply the same kind of changes here. So we need to be watching that and there's not much we can do about it other than just know that that's a factor. The other thing while we're on the feeder cattle side is, you know, just, we've talked just even in our last interview, Shaun, about the number of US feeder cattle coming into Canada, and it looks like 25 will be another record year. And, and so I think producers need to fully understand that, you know, our supplies aren't dropping off as much as this cattle cycle would have suggested because we're bringing in more US feeder cattle. So does that continue in 26? That's a question mark. US is short of feeder cattle, as we well know. There'll be some competition for them. So there's a data series, you know, we can watch every month from stats can and get a feel to that. So if those feeder cattle aren't coming in, we certainly get shorter in supplies here in Canada. But that was not the case in 25. What about beef demand? Like, you know, we talked about prices, but what about demand? Because what we've seen, you know, you look back, I bet you if you went back and looked at this episode at the very end of the year for the past three years, we're always talking about demand and how can demand continue with prices given where they are. The consumer has really stepped up, I guess. Can they do so again in 26? Interesting, Shaun. I suspect if we did go back and look at those three last three years, I would have said it can't get any better. And so I've been wrong three times. But I'm going to say it again. I think, well, first of all, 25 was the best demand in 40 years, years for beef demand in North America. But I think we've got retail prices at a level now, both in the US And Canada. US is record high and we were record high in July and we've been flat since then. But those levels are going to slow down some of this consumer demand. And so I'm projecting demand in 2026 to be off a bit from what we saw in 25. But I think I said the same thing last year, but it's been absolutely amazing. But I do think these record retail prices are going to kind of put a lid on that. Well, and on that affordability front, one of the trends we've seen in 25, and I think this expands in 26 is the options at the restaurant and at the grocery retail. In terms of the kinds of cuts, I don't remember like a skirt steak necessarily being one of the featured items on a, on a steakhouse menu. But you see that now because trying to get those cuts into, into a price range that may be a little bit more appetiz for some people, a little bit more price conscious. Restaurants in the grocery trade have had to get creative. Well, they have. And so you've talked about the restaurants at the, at the retail level. We could today walk into these retail outlets and get top end steaks where you used to in the old days have to go to a steakhouse for that. I can buy that at a retail outlet today and come home and barbecue a wonderful eating experience. So that's really helped beef demand for sure. One of the things that we've been watching for and a long time is heifer retention and the size of the cow herd and obviously now the Mexican border plays into this. From a US perspective, what can we expect to see in 2026 when it comes to the supply from the ranch? Well, we've always talked about there's kind of two key pieces you have to put together to see expansion. And one is profitability. Well, that one we've hit in spades. And then the other piece at the cow calf level. And then the other piece of course is weather, unfavourable weather conditions, moisture conditions. And for most parts of western Canada, we did see that in 25. And so I do think we are going to see more heifers retained. I don't, I think the word's going to maybe be mild heifer retention and I do think it's lots of regional expansion versus you know, some other, other areas simply won't. For example, the US still very dry when you get west of the Rockies. So I don't think you see an expansion out there. But in other parts on that did get lots of good moisture through the central U.S. you know, the feeling is some heifer expansion is starting there. We're going to get of course, a USDA cattle inventory report in January that's going to help show us just how many heifers USDA believes were held back and we'll get our report later in the spring for Canada. Yeah, and like you said, weather a huge factor there. The price, the price components there. There's no question the prices are telling us retain, but it's the weather that is, you know, Mother Nature has an ultimate say in this. Yeah, yeah. So I know you've been putting several of your meteorologists up, talking about 2026 weather and again, we don't know, but there, there is still obviously lots of drought concerns out there and so we need to be, you know, ready for that. And, and I think the other piece, when we talk about expansion and you and I have visited about this, is just how that looks and I don't think it looks the same as how it has in the past in terms of who is, is really playing in into who's holding some heifers back and breeding them. So, you know, is it, are we lucky? I don't think it's your traditional producer per se. You know, maybe it's more into some different age groups. Again we talked about the regionality depending on weather and could we see feedlots that, you know, typically were just straight cattle feeding now maybe expanding a little bit into that cow calf sector. So I think it's going to come in a different way than we've seen in the past. Yeah, I agree. I think this is one of the most fascinating parts of any sort of a cow herd expansion is the who and the why and how that fits into some of the strategies that some feed yards and ranchers have. And I, when we look at some of the broad acre crop farming expansion and consolidation that has happened, it's not across the board, everybody growing the size of their farms and I don't expect we'll see that on the cow supply side either. One of the storeys in the back half of 25 was packing plants and we saw a Tyson plant close down in the us there's talk and rumours of potentially this is just the beginning, there could be some more cutback in some of the slaughter capacity. What do you see from the packing house front? Well, certainly that's. It was the first shot over the bow in terms of U.S. packing plant capacity. We knew there was excess capacity in 25. Even with this closure in Lexington and one shift in Amarillo, there's still excess capacity. And we do have a, you know, a new packing plant in Nebraska running, ramping up now as we speak. Sustainable beef is online and there's another one coming in Texas, but that's not till closer to 2028. So. So we still have excess capacity. So that might still be a news storey. And we saw what that did to the markets when it was announced. So anytime you take capacity away from a marketplace, the market has to adjust and shift to the new leverage. I don't know if we've got that same issue in Canada, Shaun, simply because we've got cattle numbers coming in from the US that's helped to keep our supply at the feedlot and packing plant level a little bit more stabilised, if you will. So that'll be a big factor, but we sure don't need to hear that, Storey. In Canada, we really don't have enough to be losing one or even a half a shift at this point. Yeah, losing one Tyson plant in the US is. It sucks for producers, but it's nowhere close to the devastation. If the plant in High river was shut down, for example, the impact that would have. Connecting dots on one of your previous mentions though, if Canadian feed yards are not able to import US feeder cattle at the same rate, that's going to create some hardship on the supply side of fed cattle to those two plants that are in Alberta. Exactly. So all of these pieces are connected and so any. Anytime you get one of those pieces impacted, you're going to get a reaction. And we talk about closers, Shaun, like it's a permanent closure. Don't forget, there wasn't too long ago where we had a packing plant fire that changed, you know, so there's so many things that we can. That can. Can impact this. This factor, this talk about the capacity. It's not just necessarily. It could be strikes. It can striking wealth before. So all of these things play big factors into that capacity, Storey. Others I'll throw into the mix product of USA label in that and voluntary country of origin labelling. Those are things. I think we got more flare up coming here on that side of the equation when it comes to 2026. We haven't even talked about Kuzma and the negotiations that are going on as we speak. I mean, all of this trade stock talk is still in front of us and I don't have answers, but I sure hope we get some clarity and some certainty around this because we sure don't need the kind of volatility we saw like we did last spring when there was so much worry about, you know, tariffs. And I don't think that's on the table. But we still need to get some of these other things dealt with and. Of course, when we're pricing commodities in US dollars in Canada, we have to pay attention to that Canadian dollar, US exchange. And there's a lot of bearishness around this US dollar necessarily. People arguing for strength in the Canadian dollar. More weakness on the US dollar side, especially with probably in Q1, two more Federal Reserve rate cuts. That's something to watch for producers as well. Yeah. So between a weak US dollar and of course, we've got oil prices that have come down pretty substantially, all of those things really aren't helping in terms of exchange rates for sure. So something to keep an eye on. If we do see a rise in the Canadian dollar, though, it does help with the pricing power when it comes to buying those U.S. feeders. So there's a good side, bad side somewhere. There's a good storey in there. I like that. There's weeks where you want it to go up and there's weeks where you want it to go down and it's just, it never cooperates, ever. And happy New Year to you again. All the best in 2026. And we'll talk to you in a couple weeks. Thanks. Same to you and your family, Shaun. And we'll talk next year. Thank you for downloading this episode of thank you, the Beef Market Update brought to you by Bright young cheque out their silage and grazing corn stock blends or custom build your own mix for a happy, healthy herd. Talk to your retailer today.