BOXED beef cutout values take a tumble ahead of the Christmas-New Year holiday season, just when they were expected to strengthen due to increased demand. The cutouts failed to rally after the Thanksgiving holiday on November 28 and instead declined. The national comprehensive boxed beef cutout (cuts, grinds and trim) the week before last averaged $302.00 per cwt, down $0.58 per cwt from the prior week. The weakness however began at the start of November when the cutout averaged $316.14 per cwt. Of note was that the week before last saw formula sales represent 59.0% of the total sales of 6621 loads. Spot market sales represented 26.0%, forward sales 16.8% and export sales 11.1%. The latter two categories were lower than normal for this time of year.
The Choice cutout declined the first four days of last week by $2.68 per cwt to $307.84 per cwt. Beef cutout values stalled a day earlier than in prior weeks, trending lower on the close last Tuesday, says Andrew Gottschalk, HedgersEdge.com. The early weakness would be consistent with reports of slow retail beef movement following Thanksgiving. The inability to maintain beef cutout values following the reduced production schedule from the prior week is concerning. The beef cutout value needs to reestablish support at $306-$307 per cwt after failing to advance beyond initial price resistance at $312-315 per cwt. The good news is that beef sales were expected to rebound last week because of first-of-the-month payday income. However, positive reports on Christmas spending may serve to temper beef and meat sales, as gift purchases replace protein purchases, he says.
Retail Prices Fell In October
One potential positive is that retail beef prices fell sharply in October from September and were close to or lower than year ago levels. If this trend continued in November, consumers might see more favorable beef prices in the grocery store. The October All Fresh beef price averaged $8.08 per lb , down from $8.21 per lb in September and up 1.8% from October last year. The Choice beef price averaged $8.11 per lb, versus $8.41 per lb in September. It was 0.7% lower than in October last year. Pork retail prices averaged $4.92 per lb, down three cents from September and down 2.4% from October last year. Chicken prices averaged $1.99 per lb, up one penny from September and up 3.1% from October last year.
Cash live cattle prices meanwhile have traded in a narrow price range for the past six weeks. Their most recent high was $190.05 per cwt live for the week ended October 27. They softened somewhat after that but rebounded the week before last to $189.87 per cwt live. They looked like averaging $190 per cwt live last week as this was the price paid on Tuesday, Wednesday and Thursday morning. Wednesday saw a light trade of 1445 head sell in Nebraska, Iowa and Kansas. Live cattle futures sold off Thursday morning, with the December contract losing 140 points to close at $186.97 per cwt. But cattle continued to sell at $190 per cwt live, with the bulk of the trade being up north.
Carcass weights meanwhile in the week ended November 23 declined for steers and heifers from the week before. Heifer weights averaged 861 lbs, down 5 lbs from the week before but up 7 lbs from the same week last year. Steer weights averaged 952 lbs, down 4 lbs from the prior week but up 27 lbs from the same week last year. Overall weights averaged 867 lbs, up 1 lb from the prior week and up 20 lbs from the same week last year. This was the equivalent of adding 15,000 head to that week’s slaughter total, says HedgersEdge.com.
NOV COF TOTAL WAS RECORD HIGH
THE number of cattle on feed (COF) on November 1 was a record for the month at 11.986M head. It was also 30,000 head more than on November 1 last year and 386,000 head more than on October 1. The number of cattle placed on feed in October was 2.286M head, up 5.3% from a year ago and the third largest October placement level since 2015. It is likely that placements during October attained a seasonal peak, as dry conditions forced early moment of cattle off grass, says Andrew Gottschalk, HedgersEdge.com. Moisture conditions have since improved significantly, which should slow placements going forward versus a year ago, he says. Only three states reported declining placements, Arizona (down 19%), Idaho (down 15%) and Washington (down 2%). Five states reported year-on-year placement gains of 10% or more. These states were California, Iowa, Kansas, Minnesota and Oklahoma.
Feedlots marketed 1.845M head in October, which was up 4.7% on last year because of one extra slaughter day this year. While marketings were the fourth largest since 2007, a better gauge of marketings was the marketing rate (marketings versus the COF total), which was the fourth lowest on record, says Gottschalk. Relative to the total on feed, marketings were disappointing. The latter explains the record high carcass weights, he says.
Front-end supplies on feed project to trend below prior year levels by May, provided projected marketing levels are achieved, says Gottschalk. For these levels to be met, total beef demand must remain positive. The seasonal increase of 652,000 head on feed 150 days or more is 33,000 head more than the gain last year of 619,000 head from December to May. But it remains below the five-year average gain by 12,000 head. Placements are expected to decline going forward, reflecting the reduction in the calf crop experienced this year. Heifer retention, which has been limited this year, is also expected to increase next year, further reducing the available supplies for placements into feedyards, he says.
Three States Had Fewer COF
Three states, Arizona (down 11%), Kansas (down 4% and Texas (down 1%) had fewer cattle on feed on November 1 than a year ago. Texas had the most cattle on feed with 2.880M head, with its total down 20,000 head from a year ago. Nebraska was second with 2.590M head, up 50,000 head, and Kansas was third with 2.415M head, down 105,000 head. Texas placed 7% more cattle in October, Nebraska 2% more and Kansas 10% more. Only Colorado and Washington marketed fewer cattle in October than a year earlier.
Regarding placement weights, all categories except the heaviest placed more cattle in October than last year. The under 600 lb category saw 35,000 more cattle placed than last year (585,000 head). The 600-699 lb category saw 15,000 more placed (480,000 head). The 700-799 lb category saw 25,000 more placed (490,000 head). The 800-899 lb category saw 31,000 more placed (436,000 head). The 900-999 lb category saw 10,000 more placed (215,000 head) and the 1000 lbs plus category saw the same number placed (80,000 head).
One caveat to higher cattle prices is the challenge in maintaining positive beef demand, says Gottschalk. Beef production in 2025 is projected to decline as total cattle inventories continue in a cyclical decline. A reduction in the feeder cattle and calf supply, coupled with a reduced calf crop next year, should be the foundation for a positive supply outlook in the New Year. This smaller inventory level of young animals should lead to smaller, supply-reduced feeder cattle placements during the first half of the year, he says.
Intense competition between grass cattle needs and feedlot placements could lead to record high prices for feeder cattle and calves, says Gottschalk. While past cyclical highs in the price ratios have been challenged, the upper ends of these channels have not yet seen an assault. By challenging the upper end of these channels, feeder cattle and calves could advance another 8%-10%. For the upcoming year, using the October average fed cattle price of $188.15 per cwt basis western Kansas, 500-550 lb calves would project to average $350 per cwt, up from $313 per cwt during October this year. Feeder cattle weighing 750-800 lbs would average $274 per cwt, up from $250 per cwt averaged during October this year, he says.
COF HAS BEEN FLAT FOR THREE YEARS
THE number of cattle on feed on October 1 has been relatively flat since 2021 despite declining cattle inventories since 2019, says USDA’s Economic Research Service (ERS). Despite the relatively high price of feeder calves, the number of net placements to marketings has outpaced the ten-year average by more than one standard deviation for the months of September and August. When combined with a slower year-over-year pace of marketings, it has pushed the percent of cattle on feed over 150 days above year ago levels. It also suggests a larger supply of fed steers and heifers that will be marketed in the coming quarters, says ERS.
This is because earlier this year, it was expected that the number of cattle on feed would shrink year-over-year in the second half of 2024, based on smaller inventory levels at the beginning of the year, and that year-over-year higher calf prices would result in heifer retention, limiting numbers in feedlots, says ERS. But the October COF report estimated the October 1 feedlot inventory at 11.600M head, nearly flat from 11.604M head for the same month last year. Feedlot net placements in September were 2% lower year-over-year at 2.100m head. But they more than offset marketings in September, which registered 1.698M head, up 2% year-over-year, says ERS in its monthly Livestock, Dairy and Poultry Market Outlook report.
The October COF report provided a breakdown of the number of steers and heifers on feed, says ERS. The number of steers on feed was slightly above last year but heifers were almost 1% below last year. For the first time since July 1, 2023, there were fewer heifers on feed than a year ago, although not by much, which suggests that producers were not intent on retaining a substantial number of heifers. The number of heifers on feed on October 1 was still above average for the current herd contractionary phase and the downturn of the previous cattle cycle (2007–2014). Moreover, heifers on feed have averaged about 13% more on October 1 than in the previous contractionary phase. Based on weekly USDA import data, imports of heifers from Mexico for the third quarter were up by more than 45.000 head or 61% from the same period last year. Although September imports of heifers from Mexico were down about 5% from September 2023, the relatively high number of heifer imports in the third quarter suggests that the number of heifers on feed on October 1 was likely supported by imported heifers, particularly of Mexican origin, says ERS.
ERS Raise Production Forecasts
Reflecting actual and estimated slaughter data through early November, ERS adjusted its production forecast for the fourth quarter 20M lbs higher. This reflected heavier expected carcass weights and more cow slaughter than in October, which more than offset fewer anticipated fed cattle slaughtered, it says. As expectations are raised for cow slaughter in the fourth quarter, year-to-date cumulative cow slaughter is lower year-over-year. But it remains relatively strong historically in a review of previous periods of herd contraction. Based on weekly slaughter data for the week ending October 26 (the 43rd week of the year), cumulative dairy and beef cow slaughter were 24% and 8% of their respective January 1 inventories. For dairy cow slaughter, this was the slowest pace since 2008 but for beef cows it was the slowest just since 2019, says ERS.
ERS raised its 2025 beef production forecast 355M pounds from October to 26.280 billion lbs. This adjustment is based on more placements in September than previously expected and feeder cattle imports remaining strong, supporting higher expected placements in the fourth quarter, it says. In addition, it raised anticipated placements in the first half of 2025. Finally, heavier expected carcass weights in late 2024 are expected to carry over into 2025. Weekly cattle prices rebounded from September’s relative lows to establish new highs for October and November. In October, the weighted average price for feeder steers weighing 750–800 lbs at the Oklahoma City National Stockyards was $254.19 per cwt. This was an increase of $7.41 per cwt from September and almost $11 per cwt above October 2023. They are forecast to continue elevated through 2025, reflecting recent price data and changes to the timing of cattle placements and marketings. ERS’s projection for 2025 feeder steer prices is $258.00 per cwt, down from last month’s forecast. Although the second quarter forecast is raised on higher expected placement demand, for the year it is more than offset by lower prices in the third and fourth quarters compared to last month, says ERS.
Fed Steers Will Average $188 In 2025
The October average price for fed steers in the 5-area marketing region was $188.62 per cwt, higher by more than $5 per cwt from September, says ERS. It raised expectations for fourth quarter prices by $2 per cwt from last month to $188.00 per cwt, based on recent price data and improved beef cutout prices. However, in 2025, a faster pace of cattle marketed for slaughter in the second half of 2025 is expected to improve prices for an annual average of $188.00 per cwt, it says.
Comprehensive boxed beef values have increased 5% from their recent low in early October, says ERS. But that support seemed to have waned in the first week of November, mainly on lower prices for end cuts from the chuck and round. Even so, wholesale beef prices remain at record levels for this time of year. It appears that 2024 forward sales for delivery during the holidays are at or slightly below this time last year. However, it is important to follow the seasonal patterns as most medium-sized and large supermarket chains book beef four to eight weeks ahead of the delivery date for regular weekly deliveries. Spot sales for delivery 0–21 days out are mostly above a year ago and above a standard deviation from the average, which still suggests greater just-in-time purchasing decisions for this time of year, says ERS.
CARGILL AND TYSON LAY OFF WORKERS
TO say that the past two years has been challenging for American food companies is an understatement. Hence it is little surprise that protein giants Cargill and Tyson Foods are laying off workers. Cargill is set to lay off approximately 5% of its global workforce or 8000 employees. The move comes in the wake of a weak financial performance during fiscal 2024 and a restructuring of the business. “To strengthen Cargill’s impact, we must realign our talent and resources to align with our strategy,” the company said. “Unfortunately, that means reducing our global workforce by approximately 5%. This difficult decision was not made lightly. We will lean on our core value of putting people first as we support our colleagues during this transition.”
Cargill for fiscal year 2024 ended May 31 recorded $160 billion in sales, down nearly 10% from $177 billion in fiscal 2023. The company does not publish its annual earnings. Brian Sikes, chairman, president and CEO, noted in Cargill’s annual report published on August 13 that ongoing challenges facing the global food system from disruptions caused by conflict, changing demographics and volatile economic and environmental conditions impacted the company. Also in August, Reutersreported that Cargill planned to reduce its business units from five to three, with the remaining three focused on food, farming and trade and “special” businesses.
Tyson Foods has closed several poultry processing plants in recent years, and has now added a beef plant to its closure list. Tyson says it expects to lay off 809 employees at its plant in Emporia, Kan., which is a beef and pork non-harvest facility It announced in a letter to employees that it would cease all operations on February 14, 2025. Tyson officials reportedly told city officials that all Emporia operations would move to its Holcomb, Kan., beef facility.
Tyson Foods took over the operation of the Emporia plant in 2001 after buying Iowa Beef Packers (IBP). IBP had operated the plant as a cattle slaughter and processing facility for many years. But it ended those operations in 2008. The plant had a daily slaughter capacity of 4,000 head. After careful consideration, Tyson made the difficult decision to close the Emporia facility to increase the efficiency of its operations, said Tyson Foods. It added that it employs more than 5000 people across other Kansas facilities. Tyson will also close two plants in Philadelphia, laying off approximately 229 workers. A notice from the Pennsylvania Department of Labor and Industry. said the shutdown would be effective January 31, 2025. Original Philly Holdings, a producer of Philly-style steak sandwiches, was acquired by Tyson Foods in 2017. The two plants run by Original Philly included a fully cooked and a raw facility.