Livestock Analysis

CAB Insider: Market Update Feb. 26, 2025

Wed, 26 Feb 2025 22:23:30 GMT

Total beef cattle harvest last week was slightly larger than the prior week at 563,000 head, an increase of 2,000 head. Cull cow processing was the laggard with winter weather impacting movement of cattle, resulting in cow harvest pulling back 8.9% from the week before.

(Urner Barry)

Spot-market prices for fed steers and heifers remained under pressure last week with Live Cattle futures contracts on the Chicago Mercantile Exchange continuing to lead the cash market lower. Further pressure on cattle prices traces to lower boxed beef values that persist despite the smaller harvest volume and tighter supplies. Firming prices in Live Cattle futures early this week brought an end to the multi-day downward correction from recent record highs. The April contract remains a $3.63/cwt. discount to the February contract, signaling weaker fed cattle market expectations by traders near term.

The Feb. 1 Cattle on Feed report, issued last Friday, contained no surprises relative to analysts’ earlier forecasts. The number of cattle in feedyards with 1,000 head or larger capacity was 11.7 million, 99% of a year ago, on February 1. The head count placed in feedyards through January was 102% of the number placed in January 2024, a blizzard-stricken month in cattle feeding regions that resulted in a record-low placement number for that period last year.

Combined Choice and Prime quality grade rates are even with a year ago with a slightly higher USDA Prime grade recently at 10.8% of fed cattle and USDA Choice slightly lower at 72.9% of total. The Certified Angus Beef ® brand acceptance rate has ranged slightly above and below a year ago in recent weeks, averaging near 38% of carcasses from Angus-influenced cattle meeting all 10 of the brand’s quality specifications.

CAB Drives Brand Relevance With Specification Update
Evolution of cattle type, management technology and production economics continue to shape the beef business. As a pioneer in the branded beef space, the Certified Angus Beef® brand has remained relevant throughout the supply chain via continued innovation.

Effective the first week of March, the brand will modify its ribeye area (REA) specification from the current 10 to 16 square inch acceptable range to include carcasses wth ribeyes measuring up to 17 square inches.

Innovating to drive industry relevance has been a focus of Certified Angus Beef since it’s inception. For instance, in 2007 the brand transitioned from the “yield grade of 3.9 or leaner” standard to specifications for each of the yield grade component traits, including carcass weight, REA and backfat thickness.

Adapting to increasing fed cattle finished weights generated incremental shifts in the brand’s upper hot carcass weight (HCW) limit in 2014 and 2022. While heavier carcasses have inevitably resulted in larger beef cut sizes, we have been purposefully slower in modifying the REA specification until now.

In the past three years, our packing partners have shared data with us on six million carcasses, allowing us to evaluate marbling, fat thickness, REA and HCW—tracking seasonal effects and overall industry trends. The data reveals that, since shifting our maximum HCW 50 lb., up to 1,100 lb. in 2022, the proportion of carcasses excluded from CAB certification due to excessive REA size has increased by 30%. This means that in 2024, ribeye size has been the reason carcasses don’t qualify in 20% of the cases where Angus-eligible carcasses fail to meet brand standards.

(CAB)

Increasing the REA target by an inch represents a subtle shift in the distribution of ribeye sizes across all CAB carcasses. Data on more than two million carcasses in 2024 shows that just 7.4% of the brand’s certified carcasses would have fallen within the range of 16.1 to 17.0 square inches. As well, the shift will have little impact on middle meat steak thickness. The difference from a 12 oz. center-cut strip steak will vary less than one tenth of an inch between carcasses measuring a 16.1 inch ribeye versus a 17.0 inch ribeye. (Schiefelbein et. al., Colorado State University 2024)

It’s this research and examination that have culminated into the decision to further evolve the brand’s standards with this adjustment. As total fed cattle supplies trend lower in the short term, this move will positively impact everyone in the brand’s supply chain, alleviating some downstream supply pressure.

From a cattlemen’s view, the shift embraces current, and most likely future, production trends. It is not a directive toward larger cattle, rather a logical shift to sharpen the brand’s relevance in response to the evolving cattle population.

Increasingly important carcass-based cattle values will reward a few more of the highest quality carcasses previously constrained by ribeye size, especially those near the upper end of the allowable weight limit. It’s also important that producers realize that insufficient marbling is easily the primary reason that Angus-type carcasses are unsuccessful in meeting CAB specifications, with 82% of failures owing to that reason alone in 2024.

Nalivka: The Cost of Running Cows and Your Breakeven Price

Wed, 26 Feb 2025 14:56:51 GMT

Decisions up and down the beef supply chain evolve around calculating costs and breakeven prices. That calculation in the feedlot involves the cost of feeder cattle plus the cost of gain divided by the finished weight to generate the breakeven price. The cost of feeder cattle, on average, accounts for about 67% of the total cost. When herds are liquidated and followed by subsequent tight cattle numbers and high feeder prices, that percentage increases. Since mid-2023, it has averaged 74% while the feedlot breakeven for the same period has averaged $180/cwt. This compares to the tight cattle numbers from mid-2014 to 2015 when the cost of feeder cattle averaged 76% of total cost with a coinciding breakeven of $150/cwt. It is no secret that the cost of feeder cattle has the greatest impact on the feedlot breakeven.

If you retain ownership of your calves, the current market for the weight of your cattle is your opportunity cost of retaining ownership and feeding those cattle versus selling them. The decision you make to own those cattle in the feedlot or to sell them is your consideration of the risk and how your capacity to manage that risk at that point —financially and otherwise.

Coming back to the ranch, this discussion of feedlot breakeven price is also an important consideration for decision-making. While it is straight-forward to calculate feedlot breakeven, it is just as important, though perhaps not as straight-forward, to know your breakeven price at the ranch for those calves. Furthermore, it may not seem imperative to know your breakeven and manage costs in a record-high market that is giving most ranchers plenty of financial breathing room. However, this is an ideal time to build a solid analysis and understanding of your business costs. Your breakeven cost may surprise you!

I know it is easy to become tired of hearing that you need to know your ranch costs in detail. However, as with any business, it is important if you are to manage market risk, and it does not have to be a difficult project. It begins with tracking your primary costs of production, i.e., fuel, labor, feed. Divide those costs by the pounds of beef produced on your ranch and you have a great start.

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CAB Insider: Market Update Jan. 15, 2025

Thu, 16 Jan 2025 16:18:14 GMT

Now in mid-January, the cattle markets are showing exceptional optimism. Packers were actively bidding to capture spot market needs.

(CAB/UrnerBarry)

Record-high fed cattle prices have been ratcheting up in each of the past weeks. Last week’s trade in the north saw Iowa and Nebraska averages at $203/cwt. while Kansas and Texas feedyards sold for $200 to $201/cwt.

Weekly federally inspected harvest volume moved up to 589,000 head last week after two holiday weeks pulled head counts lower. While last week’s total was 44,000 head larger than a year ago, it’s important to note that the same week in 2024 was uncharacteristically impaired by winter storms.

Paul Dykstra

Historically, January fed cattle prices trend sideways through the first half of the month and then trend slightly upward in the second half of the month. Yet, the strong uptrend so far this year potentially limits immediate sizeable gains at the new levels. Feedyards are optimistically offering cattle at higher values to start the week.

On the boxed beef side of the supply chain, inventories have been curtailed on smaller throughput. This has allowed packers to push spot market prices higher in an attempt to shore up their sales revenues with rapidly rising cattle costs.

January is a month not typified by strong beef demand, as U.S. consumers tend to rein in purchases following Christmas spending. However, limited supply of unsold product at the wholesale level forces prices higher for retail end users. With a total rise of 6.8% for the period, cutout values have been swiftly increasing since mid-November. Prices were set lower for the single week of the Christmas holiday but roared back again to continue a very strong December trend.

The seasonal shift away from rib and tenderloin demand has set in with both items racing to lower prices. Wholesale CAB tenderloins are now $4.00/lb. cheaper than mid-December, a 22% drop.

On the other hand, both ends of the carcass are currently showing price surges with too many highlight cuts to mention. One such cut, the shoulder clod, is currently priced 10% higher than previous historic highs–with the exception of the 2020 backlog. Grinds are sharply higher with typical January demand increases beginning earlier this year, soaring on short lean grinding material supply.

2024 Regional Premiums and Discounts
Launched in early August 2024, the USDA’s Live Cattle Mandatory Reporting dashboard is still a relatively new tool. The purpose of the web platform is to keep market participants informed of trends in price distribution across regions and between differing quality and yield classes of cattle.

Summarizing 2024 dashboard data confirms grade trends across the five major feeding regions in the country. For a few decades USDA has reported quality grades for the largest volume grading states (Nebraska, Kansas and Texas) and broader regional data covering the nation. Over the years, this information has shaped our understanding of grading trends across regions and how cattle type and management affects quality and yield grade.

(CAB)

A brief summation of data describes the most northern cattle with greater marbling and higher quality grade outcomes, but with typically poorer average yield grades. The most southern fed cattle represent the other end of the spectrum with less marbling and lower quality grade outcomes–but more cutability and leaner yield grades.

While these are not newsworthy revelations, what is interesting about the USDA dashboard is that prices for both quality and yield grades across the regions are the focus of the information. Consequently we can somewhat deduce varying degrees of carcass quality and yield through premiums and discounts for those traits, rather than just using grading percentages.

The information is possibly much more meaningful to cattlemen when financial outcomes are tied to grading outcomes. It’s easy to see in the table that, just as suggested, the higher marbling cattle in the North achieved a much greater average premium than cattle in the South. It is also clear that smaller average quality discounts, when applied, were achieved in the North and larger discounts in the South.

On the yield grade side of the ledger, the expected advantage was held by more southern cattle with larger premiums and smaller discounts. The northern cattle saw larger average yield grade discounts and smaller average premiums.

Quality grade price spreads tend to be much larger than price differences between yield grades. This results from consumer demand for quality spiking to often exceptional levels when spring grilling demand heats up and again in the fourth quarter before winter holidays.

Both quality grade and yield grade are important to final grid values, but the table shows a wider disparity in value due to carcass marbling in comparison to yield grade. An array of outcomes exist across all regions but this data makes if fairly clear that quality remains the goal to pursue.

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CAB Insider Market Report Shows More Action on Cattle Prices and Holiday Beef Demand

Fri, 06 Dec 2024 15:57:31 GMT

Last week’s cattle harvest was curtailed with the Thanksgiving holiday, yielding just 528,000 head on the heels of the prior week’s inflated total of 631,000 head.

Fed cattle values posted a sharp recovery last week to just under $190/cwt., a $3/cwt—improvement on the prior week. Prices have been rangebound since late September, trading between $184 and $190/cwt. for the period.

Calf and feeder cattle prices have been much more active in the past three weeks with two market-moving events. Widespread precipitation through the center of the country initially sent small grain grazers to the auction markets with gusto as winter wheat and similar winter grazing prospects turned optimism higher. Additionally, the discovery of screw worms in a southern Mexico cow prompted officials to close the U.S.-Mexico border for an undetermined period. The always-volatile Feeder Cattle futures contracts on the CME have responded sharply higher on the heels of both events. The nearby January contract has settled in a range around $258/cwt. in the past five days after a rapid ascent from the $243/cwt. opening price on Nov. 15.

Urner Barry 12/4/24

(Urner Barry)

Holiday middle meat demand remains a primary feature of the beef market as carcass quality ticks higher from what appears to be the annual low percentage mix of premium-grade carcasses. The USDA Prime share is up from it’s months-long position at 10% of total to 11% more recently. The share of brand-eligible carcasses certified for CAB adjusted quickly from their year-to-date low of 32% in early November to a most recent 36%.

Holiday Demand Lift
The boxed beef market is nearing the conclusion of the final price push for high demand middle meats. The window is quickly closing on wholesale orders that will ship in time for consumers to shop ahead of the Christmas holiday. Tracking the week to week price activity shows last week’s strong upward move in cutout values breathing a bit of prolonged life into the December market than has been true in recent years. Likely the late November date for the Thanksgiving holiday has pushed buying activity a few days forward this year.

True to expectations, both bone-in and boneless CAB ribeyes are capturing the largest upward price swings as we evaluate the CAB carcass on a cut by cut basis. CAB ribeye rolls were up $1.31/lb. last week, averaging $13.48/lb. This is second only to the all-time high of $14.49/lb. wholesale price reached in 2021.

Tenderloins are also up sharply with the brand’s latest wholesale average at $17.62/lb., a $1.12/lb. hike from the prior week and $5.42/lb. higher than the summer low. Strip loins have been a value focus for the brand in the past few years as a more affordable roasting item offering much of the same appeal for the holiday. At a wholesale average $8.20/lb. strip loins are priced a few cents under last year’s price at this time.

The big picture view for the CAB cutout shows a relatively flat pricing pattern ranging from $300 to $320/cwt. since mid-July. The summer cutout price peak was lower than in 2021 and 2023 but fall demand pulled the total CAB carcass value slightly higher than those years beginning in October.

Beef demand has been exceptional in a period of larger year over year carcass tonnage beginning in the second quarter of 2024. In the past five years carcass cutout prices have averaged 2 to 3% lower than their fourth quarter highs as the holiday demand push concludes through year’s end.

Holiday Roast Wholesale 12/4/24

(CAB)

CAB Insider Market Update for Nov. 20, 2024

Wed, 20 Nov 2024 20:34:49 GMT

Last week’s cattle harvest was truncated on Monday with Veteran’s Day pulling Monday’s fed cattle harvest down to 88,000 head while the remaining weekdays averaged near 100,000 head each.

Cutout values continue to show weakness as weekly average prices have retreated nearly $8/cwt. for traditional Certified Angus Beef ® (CAB) brand carcasses. The downward price direction follows a particularly strong October trend that saw the CAB cutout increase by $20/cwt. from the first of the month.

UrnerBarry Nov. 20, 2024

(UrnerBarry)

Softer boxed beef prices coupled with Live Cattle futures trading at a slight discount to recent spot cash cattle values pushed cattle prices $2.21/cwt. lower last week. A stronger futures price trend developed early this week, taking the December contract to a premium compared to cash.

On the other hand, feeder cattle demand caught fire on the heels of widespread precipitation throughout much of the winter wheat grazing region, including Oklahoma and the Texas panhandle. Some markets reported calf prices jumping as much as $20/cwt. as grazers’ outlooks were much higher for winter growing conditions.

A review of carcass subprimal pricing shows the lower price trend across much of the chuck and round primal, including ground beef values. Ribs continue to show price stimulus with typical fourth quarter demand, trading at similar wholesale prices as this time last year. Strip loins and short loins are slightly higher than a year ago, but adjusting a bit lower in the last two weeks following a strong run-up in preceding weeks. Tenderloins remain near $2/lb. cheaper than a year ago but demand should take spot market prices higher into early December before dropping off.

Beef Cow Slaughter 11-20-24

(CAB)

Cow herd rebuilding
Beef market watchers have discussed rebuilding the nation’s cow herd for months, anticipating a turnaround in cow numbers following healthy cow-calf margins and improving drought conditions. Gross cow-calf returns have exceeded expectations as the shrinking calf supply and strong beef demand collude to drive higher receipts. Even so, turnaround from the depth of the latest drought that brought beef cow harvest to a cyclical peak in 2022 has been slow to develop. The U.S. drought monitor has shown incremental improvement in November, but widespread shades of abnormally dry to extremely dry conditions remain over a large portion of the U.S.

Record-high calf values are strong stimulus for cattlemen to maintain or increase cow herd inventories. Yet the value of heifer calves has been so good that many cow-calf producers have opted to merchandise a large percentage of the heifer crop rather than increasing retention rates for breeding. Aside from the obvious cash-in-hand, those willing to increase breeding female numbers may have encountered high interest rates, increasing cow costs and lack of labor as potential limiting factors. Recollection of the feeder cattle market crash following record-high replacement female prices in 2015 generates a modicum of caution for others.

Year to date, U.S. beef cow harvest has declined 19% (12,700 head per week) compared to 2023. Culling of spring-calving herds typically boosts beef cow harvest volume to the annual high in late October through November. So far that seasonal spike has not developed as beef cow harvest has remained flat since early September. This suggests that more mature cows are being retained in 2024 while the total supply is 1.8 million head smaller than two years ago.

Beef x Dairy Influence
Beef volume from the dairy side of the supply chain is also expected to remain in a downtrend. Latest data shows a dramatic dip in dairy cow harvest with a steep drop from 51,000 head per week in early September to just 32,000 head in late October. Despite rising production costs dairy profitability was record-large in September. The dairy segment has suffered lower production volume due to avian influenza while the profitable beef x dairy cross calves have pulled replacement heifer numbers lower in recent years. Even so, total year-over-year milk production is quoted as larger in 2025 by Mike North at Ever.Ag, who also states that both domestic and export demand for dairy products is sharp. Recent profitability in the dairy segment suggests that dairy herd expansion will limit additional short-term growth in beef x dairy calf supplies.

Dairy Cow Slaughter 11-20-24

(CAB Insider)

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