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MARKET UPDATE

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

Urner Barry Report for January 15, 2025

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.

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.

2024 Average Premiums and Discounts for Fed Cattle

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.