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feedyard cattle

by Jan 29, 2025CAB Insider

MARKET UPDATE

The past two weeks have brought about further escalation of record-high January fed cattle prices. In the five-area reporting regions Nebraska and Iowa/Minnesota were, once again, the highlights with last week averages just over $210/cwt. These regions also reported the bulk of the negotiated fed cattle trade volume. Kansas feedyards sold just near 7,500 head last week in the negotiated market at $202/cwt. with the Texas/Oklamoma/New Mexico region trading just 1,690 head at $201/cwt.

The supply of harvested cattle remained fairly tight as the weekly total slipped down to 599,000 head, a 4,000 decline on the week prior. The fed steer and heifer portion of weekly harvest head counts have been very near those of a year ago in the past two weeks while cull cow throughput has been 12% smaller than a year ago.

Live Cattle and Feeder Cattle futures prices have been forced higher as Live Cattle contracts had been lagging negotiated values until recent days.

Urner Barry Report for 1-29-2025

Boxed beef pricing in the past week saw prices in an up-and-down trend with the overall theme this month showing a rapidly higher adjustment to carcass cutout values.

Quality price spreads are narrowing in seasonally appropriate fashion with middle meat demand fading from fourth quarter highs. Even so, supplies of steak items and briskets are more head-count dependent than end meats, which benefit greatly from heavy carcass weights. As such, quality price spreads may be more sensitive as smaller fed cattle head counts are realized in 2025.

New records in carcass weights are currently being recorded, suggesting that quality grades will remain quite rich for the time being. The likelihood of this is only going to increase as we move toward expected annual quality grade highs in March.

Seasonal Shifts in Beef Item Demand

Carcass cutout values are calculated using the weighted price of each subprimal beef cut, summarized in a single price per hundredweight for the entire carcass. Seasonal demand shifts for different cuts constantly change the percentage of total carcass value that each cut represents. Often those changes are subtle, but January is typically characterized by more dramatic adjustments with contribution from several cuts shifting total carcass value.

As the name suggests, the “comprehensive cutout” value is a simplified single price for fed steer and heifer carcasses combining prices for all quality grades and product delivery periods. So far this month the comprehensive cutout has averaged $326/cwt., a 14% increase for the same period a year ago.

The expected rapid decline in key middle meat prices has taken shape this month with CAB ribeyes dropping $4.38/lb., down 28%. Tenderloins are priced $2.53/lb. cheaper since January 1, down 16%. Perhaps surprising to many, wholesale tenderloin prices are $2.53/lb. cheaper than a year ago. The other popular middle meat steak and roasting cut, the 0x1 strip loin, is slightly less favored for December holidays and consequently has begun the last three years at just 92% of it’s annual average price. The upswing for strip loin demand has begun ahead of Valentine’s Day, with the smaller volume spot market buyers capitalizing on lower prices for this cut relative to the other two premium middle meats.

CAB Primal Cutout Values Jan 2025

Just as two featured middle meats are retreating to lower prices, sharply higher values for chuck and round cuts are generating all of the upward pressure for total carcass cutout values. While consumers tend to shift demand to cheaper end roasting cuts after Christmas, the market has been sharply higher on several end cuts. One example from the chuck includes CAB shoulder clod roasts up 18% this month; typically January only increased 4% in the last three years. Prices on round cuts have risen faster this month than those from the chuck with the total CAB round cutout up 17.8% so far.

We’ve highlighted the importance of ground beef pricing for several months, given the much smaller domestic cull cow harvest. This remains a driving factor for fed cattle carcass values as grinding material from the younger cattle supply replaces a portion of the more typical source of lean cow beef.

January ground beef demand tends to increase as consumers look for lower priced proteins. The upcoming Super Bowl is also often cited as a ground beef demand driver, although chicken wings capture the limelight for the event. Wholesale prices for 85% lean ground beef are already up 20% this month, with CAB ground chuck and round each quoted from 10% to 15% higher.

With dressed fed cattle prices and the Choice carcass cutout value both very near $3.33/lb., the packer margin position is dismal. Rising input costs are typically followed by increased product pricing. However, the recent upward price trajectory of what we’d typically call “cheaper” end meats has already been eye-watering. As wonderful as beef demand has been in recent months, the near-term market leaves much to question.