Latest News From Paul Dykstra

Cattle and beef market dynamics the past year were nothing if not volatile, and in some ways, unprecedented. Supply chain imbalances and processing sector issues have been the focal point of beef price inflation.

December has started off on a high note in the fed cattle sector and all of us on the cattle side of the supply chain should be made well aware of what’s ahead in 2022.

Packers have margin to spread back upstream to the feedlot sector at their discretion, and it appears that their need to fulfill orders for high-quality product for upcoming holidays is likely a motivating factor.

All parties upstream of the packing sector are elated, and likely relieved, to see the price break free from the furrow between $120 and $125/cwt that the fed cattle trade had been digging for 19 weeks.

The fourth-quarter seasonal price pattern over five years has seen a 12% increase from September through year end. Weekly carryover must shrink before packers see a supply incentive to move bids significantly higher.

Wholesale beef values continue to fall rapidly in a fall pattern that’s grossly overdue. Much remains in flux in the 2021 market, with record-high seasonal beef values inflated alongside so many other commodities.

Fed cattle prices remain locked within a range of $120 to $125 over a long 16-week period. Market-ready steers and heifers have, in total, been readily available throughout this extensive timeline.

The modern protein buyer has been forced to become accustomed to much higher prices across beef, pork and chicken as price inflation hasn’t waned. Demand outstripping supply seems to be the theme across each sector.

Last week’s fed cattle slaughter was curtailed due to infrastructure issues at two packing plants. The steer and heifer head count on Wednesday was just 86,000 head, followed by 90,000 head on both Thursday and Friday.

The sideways trade in the fed cattle market continues as the weekly average price last week is yet again $123/cwt. This marks the 10th week in a row with live fed steer values averaging between $120/cwt. and $125/cwt.

This summer many of us have had our eyes on carcass weights, grading trends and days on feed as related to the fed cattle sector. These factors have been on abnormal paths since the onset of the pandemic and backlog.

The estimated weekly slaughter total last week was 623,000 head, a significant reduction from the prior week, thanks, in part, to the three-day weekend.

The fed cattle market has been an arduous grind for this year as prices have failed to reflect historic highs in cutout values. 

Weekly slaughter head counts are key data points gauging feedyard currentness and record boxed beef values this spring. Outcomes in those two, while both dependent on slaughter rate, are working at odds with each other.

Fed cattle prices have seen little change since the last edition of the CAB Insider, with the most recent two weeks averaging $119/cwt.

Cash fed cattle prices were lower $1 to $2/cwt. last week, arriving at an average just below $121/cwt. Futures weakness brought prices lower, despite the severe upward trajectory of carcass cutout values.

Cattle and beef markets have been a flurry of activity since the last CAB Insider with many positive market indicators sending fed cattle and cutout values rapidly higher.

Federally inspected weekly slaughter has fallen in the past three weeks 20,000 to 25,000 head below late Feb. and early March levels. Cleaning and plant maintenance is the primary factor for the smaller head counts.

Federally inspected weekly slaughter totaled 18,000 head fewer than the prior week. That was mainly because one packing plant was dark on Friday and possibly Saturday for cooler cleaning.

The two weeks in the middle of the month marked by extreme weather and insufficient fed cattle to harvest-space put a cap on cattle prices as packers found themselves well-supplied.

Extreme winter conditions and temperatures well below zero have been widespread across the country impacting most of the major central cattle feeding region.

January fed cattle prices traded in a very tight range around $110/cwt. with last week’s CattleFax average steer price up to $112.50/cwt.

Jan. fed cattle prices are normally choppy and we’re seeing that pattern in 2021. A primary difference, compared to 2020, is that last week’s average price is $14/cwt. lower, the same discount as the 5-year average.

Diving right in to the new year, we’ve already met some seasonal expectations in both cattle and beef prices.

We can’t count all the reasons why 2020 needs to find a hasty exit, but at least we can hope that a new year will bring on new dynamics for the cattle industry.

The first shipments of the Certified Angus Beef ® (CAB®) brand arrived in China in November, ushering in the potential for a new, powerful buyer for high-quality U.S. beef.

In the last CAB Insider, we reported on a rapidly retreating fed cattle market scenario. However, much has changed in the two-week interim.

The fed cattle price recovery that has been painstakingly built since early September has eroded in an extraordinary decline over the past two weeks. 

Fed cattle prices have steadily increased since the second week in September, adding roughly $7/cwt. to the short-term low at that time. Last week saw early trade mostly at $108 to $109/cwt.

Last week’s trade featured what cattle feeders hope is a trend reversal, with a $1 to $2/cwt. increase across major feeding regions.

The brand recently announced two additional carcass spec modifications to further enhance opportunities for stakeholders.

Seven weeks of slight improvements in fed cattle pricing came to a halt as packers paid $1 to $2/cwt. less for fed cattle last week.

The fed steer and heifer market keeps working toward normalized levels, but at a very slow pace. Last week’s $101/cwt. steer price was roughly a dollar higher than the week prior.  

Fed cattle prices have stabilized and improved over the past three weeks with a $2.47/cwt. total increase for fed steers in the 5-area weighted average.

July and August are normally passive months where we look to put in the summer lows. In 2020 there are more obstacles to building a bullish attitude than normal as far as fed cattle values are concerned.

The fed cattle market has brought to fruition the results many suppliers have been bracing for. The slippery slope from record cutout values has developed into a further weakening of fed cattle prices.

The market has seen significant changes since the CAB Insider two weeks ago. Fed cattle supplies and total federally inspected cattle harvest continues to ramp up to a level just short of the volume seen a year ago.

The fed cattle market has remained relatively steady over the past two weeks. Though a 6-state fed steer price came in $2/cwt. lower last week while the heavy trade volume however, came in at $118/cwt.

Last week’s federally inspected cattle harvest brought a much brighter outlook to the supply chain, as it marked a two-week continuance of increased head counts in the country’s packing facilities.

In the past two weeks, the beef supply chain has remained under extreme pressure, with packing plants undergoing varying degrees of both worsening and recovering states of workforce health.

Without question fed cattle and beef sales are currently hinged entirely on the packing sector’s ability to process cattle. Throughput has not been good with last week’s federally inspected head count at 502K head.

The federally inspected cattle harvest last week was dramatically lower by 50K head, with a 626K head total.

Beef market conditions in the past two weeks have responded with tremendous force in the wake of COVID-19 as U.S. consumer buying at retail escalated to a frenzy.

Market discussions in the current environment are challenging with near term pricing on the live cattle side of the business quite serious for many market participants.

Last week’s fed cattle market was steady to a dollar higher, depending on the region, with the 6-state regional average up to $120/cwt. The steer/heifer harvest continues with larger head counts than a year ago.

The fed cattle market over the past two weeks has declined $3/cwt. from the January high of $124/cwt.

A relatively quiet week in the fed cattle market last week with a sideways direction for the cash fed cattle price, now in its 4th week at the $124/cwt. level.

The fed cattle market continued on the same track last week remaining at $124/cwt. Fed cattle prices have now increased for 18 straight weeks basis the USDA 5-area Weighted Average Direct Slaughter Cattle report.

Cash fed cattle prices remained firmer last week with instances of $120/cwt. live trade in Iowa, while eastern Nebraska saw the top end of $190/cwt. dressed, resulting in a weekly live average of $119/cwt.

Cattle feeders took a firmer grip on the rope last week with a cash fed cattle price more than $2/cwt. higher than the week prior, although that detail is lost in the pricing table due to rounding.