CASH live cattle prices fall below $190 per cwt live for the first time since the week ended June 9. The five-area steer price the week below last averaged $189.14 per cwt live or $298.04 per cwt dressed. These were down $2.20 per cwt and $5.97 per cwt, respectively, from the prior week. The dressed price fell below $300 per cwt for the first time since the week ended May 19. Cash prices went lower again last week in a trade that began on Tuesday. A reasonably active trade in the Corn Belt saw prices in a wide range of $184-190 per cwt live or $293-295 per cwt live. A light trade down south saw prices average $183-184 per cwt live. Wednesday and Thursday saw more sales in all regions at similar prices.
Fed cattle prices need to not only recover but also advance to pave the road to move feeder cattle and calf prices higher, says Andrew Gottschalk, HedgersEdge.com. Current dry conditions and extreme heat in some cattle regions may force increased movement off grass. That said, the longer-term prospects remain price positive, as the feeder cattle and calf supply continues to shrink. Maintaining beef demand will be the greatest challenge going forward, he says.
Boxed beef cutout values meanwhile continue to seesaw on a daily and weekly basis. The comprehensive boxed beef cutout the week before last averaged $315.34 per cwt, up $0.90 per cwt from the prior week. The Choice price averaged $314.01 per cwt, up $1.20 per cwt from the prior week. It was far below the price of domestic lean manufacturing beef (90CL), which averaged $374.99 per cwt. Spot market sales represented 27.0% of the total volume, formula sales represented 55.2%, forward sales represented 17.8% and export sales represented 14.0%. The Choice cutout the first four days last week fell $1.46 per cwt to $315.99 per cwt.
COF TOTAL MIGHT INCREASE MORE SLOWLY
THE number of cattle on feed on August 1 was likely the same as a year ago, which last Friday’s Cattle on Feed (COF) report was expected to show. Feedlot inventories typically bottom in August or September ahead of a rise to a seasonal peak in late fall or early winter, says Mike Sands, MBS Research. This year’s seasonal rise in inventories may be tempered by at least a few more heifers being diverted from the slaughter channel to the beef breeding herd, along with this year’s estimated 700,000 head smaller calf crop. As a result, feeder cattle supplies will continue to tighten in the months ahead while the competition for that smaller supply intensifies, he says.
Feedlots’ slow marketing pace continues to boost fed cattle carcass weights and grading percentages and thereby boost fed beef production, says Sands. Despite the slower marketing rate, estimated weekly Choice and better beef production during July averaged nearly 5% higher than last year, likely contributing to the erosion in cutout values during the month. Sands also notes that July feedlot placements, as is frequently the case, were bolstered by cattle moving out of double-stocked grazing programs in the Flint Hills and the Osage. The large price premiums on fall feeder cattle futures in late winter and early spring likely diverted a number of two-way cattle into those grazing programs. With favorable gains, placement weights likely were relatively heavy. Some sales during the last half of July noted a significant volume of feeder cattle weighing over 900 lbs and as a result were not included in the feeder index. But continuing the month-to-month placement variability, August and September placements may slip well below the elevated volumes of last year, a reflection of generally more favorable pasture conditions in many areas this summer, he says.
USDA SLIGHTLY RAISES BEEF FORECAST
USDA raises its forecast for 2024 beef production by 81M lbs from last month to 26.736 billion lbs. This reflects a slightly faster than previously expected pace of cattle slaughter projected through the end of the year, says USDA’s Economic Research Service (ERS) in its latest monthly Livestock, Dairy and Poultry Outlook. USDA’s Cattle on Feed report in July estimated the July 1 feedlot inventory at 11.304M head, less than 1% above 11.243M head in the same month last year. Based on the report, feedlot net placements in June were more than 6% lower year over year at 1.507M head. The increase in net placements from a year ago was slightly more than anticipated, says ERS.
This resulted in a shifting of expected marketings from early 2025 to late 2024. In addition, the pace of cow slaughter has not slowed as much as previously expected. Beef production for 2025 is adjusted slightly lower from last month by 20M lbs to 25.445 billion lbs, based on an adjustment to the first quarter. As noted, the anticipated pace of fed cattle marketings in the second half of 2024 pulled marketings out of the first quarter of 2025, says ERS.
The weighted average price in July for feeder steers weighing 750–800 lbs at the Oklahoma City National Stockyards was $263.06 per cwt, says ERS. This was a slight decrease from the previous month but nearly $19 per cwt higher than in July 2023. In the sale on August 5, feeder steers averaged $246.66 per cwt, $12.49 per cwt below the previous week and $1.26 per cwt below the same week a year ago. Accounting for recent price weakness, the third quarter price forecast for feeder steers is lowered $2 per cwt to $261.00 per cwt but the fourth quarter is unchanged from last month at $268.00 per cwt. The 2025 forecast is unchanged from last month at $262.50 per cwt, says ERS.
Weekly boxed beef values and fed steer prices in the 5-area marketing region in the first half of 2024 followed a similarly strong trajectory, says ERS. However, weekly boxed beef values retracted from the peak set the first week of July and slaughter steer prices followed. With record prices for slaughter steers recorded last month, the July average price for slaughter steers in the 5-area marketing region was $194.82 per cwt, a slight increase from June and about $11 per cwt higher year-over-year. Based on daily price data to date in August and a slightly faster pace of marketings in the third quarter, the third quarter 2023 slaughter steer price forecast is raised $3 per cwt to $193.00 per cwt, and the fourth quarter is raised $2 per cwt to $190.00 per cwt. The 2024 average price is forecast at $188.11 per cwt, an increase of more than 7% from 2023. The forecast for first quarter 2025 is raised $1 per cwt to $189.00 per cwt as the price strength will be carried into next year. The 2025 average price is forecast at $190.75 per cwt, an increase of more than 1% on 2024, says ERS.
Based on the firmer than expected demand in several key markets, the forecasts for third and fourth quarter beef exports are raised 15M lbs to 725M lbs and 700M lbs, respectively, says ERS. This results in a 2024 annual forecast of 2.940 billion lbs, which would be about a 3% decrease year-over-year. The quarterly forecasts for 2025 are unchanged from last month, with the first half totaling 1.325 billion lbs, which would be a year-over-year decrease of about 13%. The annual forecast is 2.500 billion lbs, a 15% decrease, says ERS.
CANADIAN FUND BUYS IN AUSTRALIA
CANADIAN super fund manager Alberta Investment Management Corp (AIMCo) completes contracts for the purchase of the Kimberley Meat Co. beef processing facility in Western Australia’s Kimberley region. A purchase price of around A$55M was negotiated for the combined Yeeda Group of companies. They include the near new processing plant near Broome and Yeeda Pastoral Co’s two large nearby pastoral leases. These cover 1.174M acres (475,000 hectares) of mostly leasehold country and carry almost 14,000 cattle. The combined price made the processing plant look like an absolute bargain in terms of replacement cost, a veteran processing contact told Beef Central. At least one other overseas-based entity showed interest in the plant but less so in the associated pastoral assets. AIMCo is one of Canada’s largest and most diversified institutional fund managers, with more than C$160 billion in assets under management.
GRAZING OFFERS FIRE PROTECTION
A STUDY from USDA’s Agricultural Research Service (USDA-ARS) again confirms the value of livestock grazing as a tool to protect western rangelands from devastating wildfire. The Public Lands Council (PLC), which represents ranchers who hold federal grazing permits, hailed this research as more proof of the important role livestock grazing plays in protecting the nation’s natural resources. In a year where wildfire has run rampant across the West, the study is a great reminder that livestock grazing must be an integral part of land management and wildfire mitigation, says PLC.
PLC continues to see the scientific community confirm what generations of ranchers have demonstrated, says PLC President and Colorado grazing permittee Mark Roeber. Managed livestock grazing is the best, most nimble tool to support biodiversity, protect wildlife habitat and stabilize ecosystems plagued by fire and invasive species. This study should be heeded by media outlets and environmental activists who have wrongly called for the end of livestock grazing, because if you don’t have grazing in the West, you don’t have conservation. According to USDA-ARS, the study demonstrated that grazing supports reduction of fine fuels that pose huge risks in sagebrush ecosystems that are prone to fire. By applying targeted grazing in these landscapes, managers are able to create effective fuel breaks to slow fire activity and improve suppression efforts. Conversely, when grazing is excluded, invasive annual grasses run rampant, resulting in a higher fire risk, lower biodiversity and lower utilization from wildlife, says PLC.
USDA’s research clearly demonstrates that stakeholders like the Bureau of Land Management, Fish and Wildlife Service and Forest Service should be confident in their partnership with public lands ranchers, says PLC Executive Director Kaitlynn Glover. Public lands ranchers invest in careful management of hundreds of millions of acres to make landscapes more resilient to risks like fire and invasive species. As PLC looks into the future, it is clear that grazed landscapes will increasingly be held as prime examples of healthy, well-managed public lands and people will have federal lands ranchers to thank, she says.
REBUILDING THE HERD COULD TAKE YEARS
REBUILDING the U.S. cattle herd could take years as market conditions encourage ranchers to sell off rather than keep their young cattle. Although pasture conditions and feed costs are improving, there are still financial upsides for producers to send their beef calves and heifers to feedlots rather than raise them. This is according to a CoBank Knowledge Exchange research brief. Some top analysts are expecting herd numbers to return to 2023 levels in the next three to four years if market conditions persist, while others believe cattle contraction will continue through 2027, says CoBank analyst Abbi Prins in the brief.
The duration of the latest beef cow decline has raised concerns for large companies and beef stakeholders, says the brief. The number of U.S. beef cows have retracted over the past five years to its lowest point since 1961 at 28.2M head, according to USDA. Widespread drought played a large role in the cattle squeeze. The severely dry conditions damaged pastures and lowered hay supplies as market factors drove up prices for cows, feed and inputs. While more favorable weather has improved forage production this year and feed costs begin to come down, cattle prices remain strong, incentivizing ranchers to continue selling their animals, says Prins.
Right now, it is not worth the risk to hold on to heifers as the potential upside of selling the calf has an immediate pay off, says Prins, noting a $300 upside to sell rather than raise calves. Should cattle prices stay strong, CoBank estimates it could be 2026 or 2027 before heifer retention rates and the beef cow population pick up, pressuring buyers like Tyson Foods, JBS and other large meat packers. According to the Sterling Beef Profit Tracker, packers lost nearly $100 per head throughout 2023 and 2024 and are on track to be in the red again next year as corn and soybean costs soften. Looking ahead, CoBank says it is critical for producers to generate cash flow and build up their feedstocks after a couple of tough years with poor weather and high interest rates. Once the herd does start rebuilding, a drastic change in beef cow numbers is unlikely as the growth could look more like a slight bump in cow inventory, says Prins.
PILGRIMS PAYS $100M OVER UNDERPAYING
PILGRIM’S Pride Corporation (PPC) agrees to pay $100M to settle a class action suit alleging it was part of a conspiracy to underpay chicken growers. PPC denied any wrongdoing in the settlement agreement. With the preliminary settlement filed on August 16 with the U.S. District Court for the Eastern District of Oklahoma, the total recovery for the case would be $169M. Both the recovery from Pilgrim’s and the aggregate recoveries in the case represent the largest sum recovered for a class of growers in any litigation, according to court documents. Furthermore, the settlement filing noted that the $100M would be the largest amount paid in any antitrust case in the protein industry.
Other poultry processors to have reached agreements in the case include Tyson Foods ($21M), Perdue Farms ($14.75M), Sanderson Farms ($17.75M) and Koch Foods ($15.5M). If approved, the Pilgrim’s settlement would finalize the class action lawsuit. In the case, broiler growers alleged they were deprived of vigorous competition for their broiler-grow out services because of a conspiracy between Pilgrim’s, Tyson, Perdue, Sanderson, Koch and 17 co-conspirators. The settlement class covers broiler growers compensated for their services by one of the named poultry processors or a co-conspirator during the period January 27, 2013, through December 31, 2019.
PPC is 75.3% owned by JBS SA, the world’s largest protein company. As reported in the August 19, 2024 issue of CBW, PPC had EBITDA in the second quarter of $782.8M, with a 17.2% margin. This was by far the largest EBITDA of any of JBS’s units. JBS last week released its 2023 Sustainability Report, which updates its sustainability approach, initiatives and strategies in action across the value chain and its global goals. The global meat producer continues implementing strategies across Australia, Brazil, Canada, Europe, Mexico, New Zealand, the United Kingdom and the U.S., it says.
As a food company with operations in 20 countries, JBS is part of a resilient global food system tasked with increasing food production to feed a growing global population, says Gilberto Tomazoni, JBS’s Global CEO. Sitting in a pivotal position in the food value chain, upstream from rural producers, grain originators and input suppliers, and downstream from distributors, retailers, restaurants, and consumers, JBS can help influence and drive change across a complex supply chain. To help with sustainability efforts, JBS plans to assist farmers with stewarding natural resources and enhancing productivity. The company also wants to help source responsibly-produced sustainable food, strengthen food systems and operate responsibly, he says.
As JBS tackles the many sustainability topics that need its attention, taking a systems approach is key, says Jason Weller, JBS’s chief sustainability officer. This encourages and allows for innovation, collaboration, prioritization and investment, all of which are essential to making meaningful progress. Notable sustainability updates in 2023 included approving hundreds of projects for scope 1 and 2 emissions reductions to be implemented in JBS facilities. The projects totaled more than $150M. Additionally, more than $5M in partnership projects were approved to further the JBS Scope 3 greenhouse gas emissions reduction strategy, says Weller.
JBS continues to work on initiatives for transparency and traceability in the livestock supply chain, it says. These include its Transparent Livestock Farming Platform in Brazil, climate-smart facility upgrades and an off-grid poultry of the future program in the United Kingdom. Multiple methane-to-renewable-energy conversion initiatives are being established in the U.S. and Australia. JBS’s belief is that no one company or organization can address the issues they face alone, says Weller. As such, JBS looks to partner with stakeholders throughout the value chain to more effectively address this critical work. It invests time, expertise and resources into creating a better future and a more resilient food system in key areas such as economic viability, environmental quality, global food security, affordable food choices and improved quality of life for people doing the work.