SPOKANE — Wheat markets are burdened by a high domestic supply, while cattle prices could peak this year and then drop significantly after several years of highs.

Randy Fortenbery, Thomas B. Mick Endowed Chair of Small Grains Economics at Washington State University, and Duane Lenz, retired CattleFax market analyst, now a consultant, shared outlooks for the wheat and beef markets during the annual economic forecast Feb. 5 at the Spokane Ag Show.

President Donald Trump has initiated tariffs with Canada, Mexico and China, which account for 49% of all U.S. ag exports and are significant markets for U.S. wheat farmers and cattle ranchers, both speakers said.

The tariffs to Canada and Mexico are delayed for 30 days. The tariff on China went into effect Feb. 4, but there are still ongoing discussions between Trump and Xi Jinping.

“How we interact with them over this next marketing year can have a lot to do with what prices we see at the farm level, depending on whether trade continues, grows or gets constrained because of frictions in the trade environment,” Fortenbery said.

Wheat outlook

The domestic wheat market has growing stocks, relatively lower prices and problems working through a large supply, according to USDA, Fortenbery said.

Average U.S. price is $5.55 per bushel. The price must be below $5 to generate a Price Loss Coverage crop insurance program payment.

“Prices are very low, but USDA’s not predicting a payment this year,” Fortenbery said. He doesn’t expect much change as the marketing year ends May 31.

Global world stocks are lower, due to problems in Russia and the European Union.

“They had exact opposite problems, but they both dropped dramatically,” Fortenbery said. “It was way too wet in the EU for the 2024 crop … Russia was way too dry.”

U.S. wheat exports are up compared to the last three years.

“World trade is down, so that means our market share is growing,” Fortenbery said. “If we have any kind of production problem, we’ll have a bigger influence on the world prices.”

But given the current “burdensome supplies,” it will be hard for the market to react if the U.S. is driving a large part of the export market and has relatively large supplies, he said.

Forward pricing wheat

Options traders recently expected December wheat futures prices to close below $6.90 per bushel, and above $4.90 per bushel, Fortenbery said.

“If nothing’s changing in the fundamentals, where do I want to start forward pricing … and where do I want to be cautious?” he said.

December futures prices recently saw a 30-cent upward swing. When that happens, Fortenbery worries that farmers will move their price expectations, even though the fundamentals have not changed.

“You want to be careful about assuming we’re going to $7 (per bushel) on the board, because suddenly we put 30 cents in here the last few days,” he said. “Part of that, quite frankly, is just response to the political environment: As we discuss whether we are or are not going to have tariffs and what level they’re going to be and when they’re going to go into place, the market tends to react to that information.”

If December futures approach $6.70 per bushel, growers might think about forward pricing part of their 2025 harvest, Fortenbery said.

Cattle price outlook

The cattle market tends to run on a 10-year price cycle, Lenz said.

“Do not be surprised if this year is our cycle high,” he said.

Average bred heifers are at about $3,200 a head, a price rally that’s lasted about four years.

“How far do you want to press it next year?” he asked. “Maybe it’ll go on forever, I don’t know.”

In about 2015, prices got up to about $2,200 per head for nearly two years, then dropped by about $800 a head the following year, he said.

“When this thing comes apart —  I don’t know when it is, we’re probably closer to it then we realize – these heifers will drop $1,000 a head,” Lenz said. “If you’re going to buy bred heifers in the next year or two, be very, very careful.”

If a rancher has spare heifers to market, Lenz recommended selling them “and getting the heck out of Dodge.”

“There’s a good chance you’ll buy them back in two years at $1,000 a head less,” he said.

High beef prices

Profitability has shifted from the meatpacker to the cow-calf rancher due to low supplies, Lenz said.

Packers have the capacity to slaughter close to 500,000 head per week, but there’s only about 450,000 head.

“The leverage has shifted to the seller, and they’re pushing it for all it’s worth,” he said.

Annual beef consumption is about 56 pounds per capita, he said

Lenz predicted there will be headlines in the next few years about reduced demand.

“Beef demand is not necessarily down, there’s just less of it; that’s a big distinction,” he said.

Additional pork and poultry consumption is offsetting the beef decrease. Beef retail prices aren’t as competitive at about $8.25 per pound, Lenz said.

“Demand very seldom has been higher,” he said. “Can history repeat itself? We’re going to find out. That’s the danger of selling beef this high. It’s great for the industry, but what cures high prices? High prices. Be careful.”