BOXED beef prices slide despite the Labor Day holiday-shortened production week and light slaughter levels last week. The holiday week saw an estimated kill of only 542,000 head, well below what analysts had expected. It was thus disappointing that the national comprehensive boxed beef cutout (cuts, grinds and trim) averaged $312.12 per cwt, down $1.45 per cwt from the prior week. The Choice cutout averaged $309.57 per cwt, down $2.08 per cwt. Last week’s slaughter total expected to be around 615,000 head. But even at this level, the daily cutouts declined. The Choice cutout fell by $2.23 per cwt the first four days to $307.18 per cwt, while the Select cutout fell by $0.48 per to $295.64 per cwt.
Of note the week before last was that formula sales represented 57.3% of the total volume of 6302 loads. This high percentage reflects the fact that such sales usually represent a larger percentage than normal in holiday weeks. Spot market sales the week before last represented 27.0% of the total, forward sales represented 15.6% and export sales represented 12.7%. The week also saw the price of domestic lean manufacturing beef (90CL) average $374.25 per cwt. This was its 11th week in a row above $370 per cwt.
Cutouts Are In Tug Of War
The beef cutout values are in a tug-of-war scenario, says Andrew Gottschalk, HedgersEdge.com. Packer margins are positive (by $52.80 per head last Thursday), cattle prices are lower and demand is likely to find it a challenge to score any sustained advance in September. This can potentially lead to lower cutout values as packers drop prices to improve volume and yet maintain positive margins. But the small harvest the holiday-shortened week does not provide for excessive product accumulation, potentially leading to higher beef cutout values, he says. Meanwhile, cash live cattle prices remain under pressure. The 5-area steer price the week before last averaged $181.18 per cwt, down $2.63 from the prior week. The cash trade through Wednesday last week saw cattle sell in Iowa-Minnesota at $180-182 per cwt or at $289-291 per cwt dressed. Prices down south averaged $181 per cwt live. Nebraska Thursday sold cattle at $181 per cwt live or at $293-294 per cwt dressed.
TYSON WILL KEEP BEEF PLANTS OPEN
TYSON Foods, the largest fed beef processor in the U.S, has no intention of closing any beef plants. Brady Stewart, president of Tyson’s beef and pork segment and chief supply officer, was asked at the Barclays Global Consumer Staples Conference if Tyson would consider any beef plant closures with recent capacity reductions. His response was: “We really like our asset base. It’s a well-invested asset base. We took care of those assets during the better times relative to the opposite side of the beef cycle as well and continue to have opportunities for us to improve within our business relative to mix, relative to efficiencies, relative to making sure we understand where the customer is going to be in terms of primal and mix and really like our path forward with our current asset base.” Stewart also addressed the shrinking U.S. cattle herd, when heifer retention could be expected to stabilize and how Tyson will cope with the current cattle supply in the coming year and beyond. Tyson is not seeing anything meaningful, he said. But it is important to understand a few different points. First and foremost, better pasture conditions in the last couple of years are helping provide at least an opportunity to retain some heifers. Cow liquidation has basically ceased, which provides some stability. After every cattle cycle seen in the past, the next step is certainly to have heifer retention. That’s what Tyson continues to look for, he said.
ASIA SUPPORTS MORE BEEF EXPORTS
ASIAN markets continue to recover their appetite for U.S. beef, while demand for U.S. beef in Mexico remains impressive. These two regions meant exports of U.S. beef in July continued to build momentum. Pork exports in July were also well above year ago levels, led by a value record for shipments to Mexico, says the U.S. Meat Export Federation (USMEF). July beef exports totaled 110,419 metric tons (mt), up 7% from a year ago and the second largest of 2024. Export value climbed 12% to $910.9M, also the second highest this year. For January through July, beef export value increased 6% from a year ago to $6.13 billion despite a 2% decline in volume (754,152 mt).
It is very gratifying to see demand for U.S. beef trending upward in Asian markets, with Japan and Taiwan leading the way, plus an outstanding showing in the ASEAN region, says USMEF President and CEO Dan Halstrom. U.S. beef has weathered severe headwinds in Asia and especially in Japan but the outlook for the remainder of the year is encouraging. July was also another impressive month for Mexico, which continues to display excellent demand for an expanding range of U.S. beef cuts and variety meats, he says.
Pork exports reached 241,210 mt in July, up 10% from a year ago, says USMEF. Export value jumped 13% to $710.5M, fueled in part by a record $244.5M for leading market Mexico. Through the first seven months of 2024, pork exports were 4% above last year at 1.76M mt. Export value was just under $5 billion, up 6% from a year ago when pork exports set an annual value record of $8.16 billion. Mexico was definitely the pacesetter for U.S. pork again in July, says Halstrom. But demand was also outstanding in Central America, Colombia and the Caribbean. Exports to Korea also continued to perform well in what is shaping up to be a record year, he says.
Beef Exports To Japan Increase
Following a solid June performance, July beef exports to Japan reached 22,031 mt, up 14% from a year ago, while export value climbed 17% to $175M, says USMEF. These results pushed January-July exports even with last year’s pace at 149,051 mt, while export value increased 7% to $1.15 billion. Although Japan’s economy continues to struggle, surging tourism has been a bright spot and has bolstered demand for U.S. beef in the foodservice and hospitality sectors, says USMEF. While the yen has strengthened in recent weeks versus the U.S. dollar, it still weighed on exports, trading in the 160 range in the first half of the month. Japan’s real consumer incomes increased in June and July after 27 months of declining wages in inflation-adjusted terms.
Mexico’s demand for U.S. beef continues to expand despite the recent devaluation of the peso, says USMEF. July exports to Mexico were the largest this year at 21,081 mt, up 19% from a year ago. Export value climbed 17% to $122.5M, the highest in nearly four years. For January through July, exports to Mexico were 14% above last year in volume (134,554 mt) and 19% higher in value ($785.3M). This includes more than 71,000 mt of beef variety meat, up 15% from a year ago, valued at $192.7M (up 10%). Mexico is the largest volume destination for U.S. beef variety meat and second to Japan in value, says USMEF.
July beef shipments to leading value market South Korea totaled 17,599 mt, up slightly from a year ago, while export value increased 9% to $169.3M, says USMEF. Through July, exports to Korea were up 2% in value from a year ago at $1.27 billion despite an 11% decline in volume (133,937 mt). After a slow start in 2024, beef exports to Taiwan have accelerated in recent months. July shipments totaled 6142 mt, up 16% from a year ago, while export value soared 33% to $69.5M. While January-July volume to Taiwan still trailed last year (36,852 mt, down 6%), export value increased 7% to $404.2M, says USMEF.
Led by larger shipments to the Philippines, Indonesia and Vietnam, July beef exports to the ASEAN region reached 4466 mt, up 70% from last year’s low volume, says USMEF. Export value more than doubled to $37.3M (up 125%). Although January-July exports to the region remained below last year’s pace (23,089 mt, down 3%), export value climbed 36% to $193.3, says USMEF.
Exports To Middle East Rise 13%
Fueled by strong variety meat demand in Egypt and larger muscle cut shipments to the United Arab Emirates, Kuwait and Qatar, July beef exports to the Middle East totaled 4253 mt, up 13% from a year ago, while export value increased 2% to $19.6M, says USMEF. Through the first seven months, beef exports to the region rebounded impressively, increasing 28% year-over-year in both volume (32,448 mt) and value ($146.6M). Although beef exports to Central America declined slightly in July (1408 mt, down 1% from a year ago), export value increased 7% to $10.3M. January-July exports to the region increased 6% from a year ago to 12,209 mt, valued at $88.6M (up 12%), with shipments on a record pace to leading market Guatemala and to Panama.
July beef exports to China/Hong Kong achieved a year-over-year increase in value ($162M, up 5%) despite falling 3% in volume to 17,470 mt, says USMEF. Through July, exports to the region declined 11% from a year ago to 122,251 mt, while value fell 5% to $1.14 billion. Beef export value equated to $418.43 per head of fed slaughter in July, up 4% from a year ago. The January-July average was $418.38 per head, up 6% from the first seven months of 2023. Exports accounted for 14% of total July beef production and 11.6% for muscle cuts only, each down slightly from a year ago. The January-July ratios were 14.1% of total production (down from 14.4% a year ago) and 11.8% for muscle cuts (down from 12.1%), says USMEF.
After softening modestly in June, pork exports to leading market Mexico roared back in July at $244.5M, up 29% from a year ago and the highest on record, says USMEF. Export volume was also outstanding, climbing 24% to 100,577 mt. January-July exports are on a record pace, climbing 8% above last year at 663,777 mt, while export value jumped 15% to $1.45 billion. Mexico’s hog prices surged in July and limited domestic availability contributed to the large increase in demand for U.S. pork. Pork exports to Japan were the lowest of the year in July but still above year ago levels. July shipments totaled 26,571 mt, up 5%, while export value increased 2% to $109.3M. Through July, exports to Japan remained slightly below last year’s pace in both volume (208,121 mt, down 2%) and value ($846.3M, down 1%), says USMEF.
TYSON EXPLAINS PORK PLANT CLOSURE
TYSON Foods’ senior executives addressed several areas of the company’s meat production business during the Barclays Global Consumer Staples Conference. One area concerned its beef plants, which CBW reports on in its first story. Another area was the state of its pork business following the decision to close its Perry, Iowa, plant in March. It is important to note that Tyson has made some network design changes recently with its Perry plant closure, said Brady Stewart, president of Tyson’s beef and pork segments and chief supply officer. The closure was a very difficult decision but ultimately it closed at the end of June to really get Tyson’s network right. Closure gives Tyson better capacity utilization and efficiencies in its existing assets. It feels good about the way these assets are running today, he said.
The executives also talked about the growth in Tyson’s chicken business in the last few quarters. Tyson has seen benefits relative to the demand for chicken which has been very strong, said Stewart. When you balance that against its operational improvements, Tyson laid out a strategy about 1.5 years ago that Wes Morris and his team has executed in Tyson’s poultry business that it is extremely proud of, he said.
Tyson CFO Curt Callaway commented on how the company’s portfolio of meat products helps it cope with customers’ changing behaviors. Tyson sees segments of consumers search for value, whether in retail or in foodservice, he said. People at the Barclays conference are looking at the same data and continue to see private label sales continue to pick up a little bit of market share. Calaway also mentioned some of the new capital investments Tyson made recently in its new bacon facility in Bowling Green, Ky., and its new fully-cooked chicken plant in Danville, Va., along with some new plants internationally. There is a lot of spending that has occurred within Tyson’s existing facilities to continue to streamline and automate and bring forward its operational excellence agenda. That has been one of the catalysts that has enabled Tyson to transform from 2023 to 2024 in terms of performance, he said.
CATTLE ON FEED FORECASTS
David Anderson, Texas A&M University: COF 100.3%, placed 97.0%, marketed 96.5%; Kevin Coburn, S&P Global Commodity Insights: COF 101.6%, placed 98.8%, marketed 96.3%; Tyler Cozzens, Livestock Marketing Information Center: COF 100.2%, placed 96.8%, marketed 97.0%; Andrew Gottschalk, HedgersEdge.com: COF 100.7%, placed 98.4%, marketed 96.4%; Rich Nelson, Allendale Inc: COF 101.1%, placed 100.4%, marketed 97.5%; Lori Porter, Allegiant Commodity Group: COF 100.7%, placed 98.8%, marketed 96.3%; Mike Sands, MBS Research: COF 101%, placed 99%, marketed 96%
SEPT COF TOTAL WAS ABOVE LAST YEAR
THE number of cattle on feed on September 1 was likely up 0.8% on the same date last year, based on the average estimate of CBW’s seven analysts. This Friday’s Cattle on Feed (COF) report is expected to show a total of 11.203M head, says Andrew Gottschalk, HedgersEdge.com. This would be up 76,000 head on the prior year. This level is consistent with the previous five-year average and 191,000 head below the previous September 1 peak in 2020. The decrease in total COF from July 1 to September 1 was 101,000 head, versus a decrease of 156,000 head during the previous five-year average, he says. The report is expected to show August placements at 98.4% of a year ago and August marketings at 96.4% of a year ago, he says.
Front-end fed cattle supplies on September 1 (COF more than 150 days) are estimated to be 2.541M head, 4.5% above the previous year and 8.6% above the previous five-year average, says Gottschalk. Carcass weight data confirms that this category of cattle is front-end loaded by approximately 110,000 head more than last September. Actual steer and heifer carcass weights for the latest reporting week (August 31) were 25 and 20 lbs above year ago levels, respectively. Average carcass weights (including cows) were up 27 lbs. The latter was equivalent to adding 20,185 cattle to that week’s harvest. Carcass weights, which declined less than normal into June, have turned seasonally higher and are advancing faster than the seasonal uptrend, he says. This trend should prevail into the Nov-Dec timeframe. Placements going forward are likely to register year-on-year monthly declines as the available feeder cattle and calf supplies outside feedyards continue to shrink. Additional shrinkage in this supply should occur once heifer retention begins to accelerate, he says.
Placements Rose Seasonally
Following the larger feedlot placements in July, movement into feedyards during August continued to rise seasonally, says Mike Sands, MBS Research. But they likely slipped to around 99% of last year’s elevated volume, while exceeding the 2015-2019 average by about 5%. Although pasture conditions eroded seasonally during the month, overall conditions were much better than a year earlier, likely limiting early movement off summer pastures and contributing to favorable weight gains. But drought conditions remained stubbornly persistent in areas of the mid-Atlantic, Southeast, Southwest, and Northern Plains. Besides the dryness issues, sharply lower feeder cattle and calf prices during the month likely continue to hamper any significant herd rebuilding efforts and heifer retention. With the breeding season for next year’s spring calf crop largely concluded, the elevated investment costs, coupled with the slide in feeder cattle and calf prices, may have pushed a few additional heifers toward the feedyard, he says.
August marketings are projected near 96% of last year, with that short-fall mostly the result of one less business day during the month versus last year, says Sands. Adjusted for that difference, the marketing rate was about 1% higher than last year. Still, front-end supplies (cattle on feed over 150 days) remain historically large. The strong basis failed to spur a more aggressive marketing rate, which was also tempered by moderate slaughter schedules which were intended with limited success to support the beef market. The larger front-end supplies, coupled with a larger September 1 feedlot inventory, is expected to support larger fed cattle supplies through the balance of the year and into early 2025, says Sands.