MARKET UPDATE
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 November 15.
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 acitivity 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.
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Cow Harvest Unseasonally Low
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.
Seasonality Takes Over
The fourth quarter tends to be the period most prone to follow historical seasonal patterns for carcass cutout prices. Although annual price levels have certainly advanced to record levels, the pattern in spot market values from October through December tends to track a pattern.
Increasing Carcass Weights and Ribeye Size
Feeders will continue to reap rewards in the cost and return equation in a market that has recently moved to higher prices. Grid-sold cattle are, on average, capturing Choice and Prime quality premiums at a higher percentage rate this fall. Yet, yield grade and heavy-weight discounts threaten to devalue premiums for the heavy pens of steers, in addition to fewer CAB qualifiers.