THE cash live cattle and wholesale beef markets start to decline after moving higher than expected in the first week of July. A key factor going forward will be beef demand, which historically declines 3% from June to July. The heatwave over much of the U.S. will be another factor, as heat is usually a negative for beef sales. The key factor on the supply side is that the market will continue to be well-supplied with fed cattle. The front-end supply (cattle on feed 150 days or more) on July 1 was estimated at 2.679M head. This was 10.1% above the previous year, says Andrew Gottschalk, HedgersEdge.com. Carcass weight data confirm that the number in this category of cattle is front-end loaded by approximately 245,000 head more than last July, he says.
Cash live cattle prices have topped for now after posting another new all-time high the week before last. The 5-area steer price averaged $197.09 per cwt live or $313.69 per cwt dressed. These were up $1.28 per cwt and $0.22 per cwt, respectively, from the prior week. It was the fourth week in a row that the live price exceeded $190 per cwt and the seventh week in a row that the dressed price exceeded $300 per cwt. The holiday-shortened week however saw only 38,763 head reported sold in the region. This meant that packers were expected to be more active in the market last week. Tuesday saw a light trade in Iowa-Minnesota at $190-191 per cwt live and a more active trade in Kansas and Texas at $185-191 per cwt live. Wednesday saw a moderate to active trade in all regions. Prices up north were $194-199 per cwt live or $312-315 per cwt dressed. Prices down south were $187-192 per cwt live.
Choice Cutout Slides After Soaring
What goes up must come down, says the old adage, and this has applied to the Choice beef cutout so far in July. The cutout the first week of the month averaged $325.60 per cwt, up $7.18 per cwt from the week before. But it fell sharply on the spot market last week, starting on Tuesday. It lost $8.78 per cwt in four days to be at $321.65 per cwt on Thursday. The comprehensive cutout (cuts, grinds and trim) the week before last averaged $324.47 per cwt. This was up $6.03 per cwt from the prior week and up 2.5% on the same week last year. Of note was that formula sales accounted for 66.1% of the total volume of 5226 loads. Spot market sales accounted for 26.7%, while forward sales were small at 7.2%. Export sales accounted for 9.4% of the total. The week also saw the price of domestic lean manufacturing beef (90CL) set another all-time record of $372.01 per cwt.
Carcass weights meanwhile remain well above last year’s levels but at lower levels than in previous weeks. Steer weights in the week ended June 29 averaged 911 lbs, down 2 lbs from the prior week but up 27 lbs from the same week last year. Heifer weights averaged 830 lbs, down 3 lbs but up 23 lbs, respectively. Overall weights averaged 841 lbs, down 3 lbs but up 32 lbs from last year. This was the equivalent of adding 24,145 head to that week’s slaughter total of 610,420 head, says HedgersEdge.com. Packers meanwhile continue to keep a lid on their fed steer and heifer slaughter levels, in large part because their margins remain only slightly positive. Their margins for the five weeks to the week before last averaged $19.39 per head, according to HedgerEdge.com data. They were positive by $12.50 per head last Thursday. This means that the slaughter total for the year to July 6 was an estimated 752,500 head lower than during the same period last year. At this rate, the annual harvest would decline by approximately 1.505M head, says Gottschalk. It is interesting to note that the actual cow harvest during the week ending June 22 was below 100,000 head. The last time this occurred was the week ending June 27, 2016, during a year of rapid herd expansion, he says. Cow slaughter has averaged 19,400 head lower per week this year than last year, says HedgersEdge.com.
BEEF EXPORT VALUES RISE
U.S. beef exports in value terms had their best month in May since June 2023. Beef export value reached $902.4M, 3% above last year and the highest in 11 months. For January through May, beef exports followed a similar trend, increasing 5% year-over-year in value to $4.29 billion, despite a 4% decline in volume (533,578 metric tons). May beef exports totaled 110,133 mt, down 5% from a year ago but the second largest of 2024, says the U.S. Meat Export Federation (USMEF). Pork exports posted another solid performance in May but were below last year in both volume and value.
It has been encouraging to see demand stabilize in Japan, where U.S. beef certainly faces significant headwinds, says USMEF President and CEO Dan Halstrom. The tourism boom has provided a much-needed lift for Japan’s foodservice sector and it is a source of optimism for buyers and importers. Taiwan and the ASEAN region were also bright spots for U.S. beef in May, along with Western Hemisphere markets such as Mexico, Guatemala and the Caribbean, he says. May pork exports totaled 251,447 mt, down 4% from a year ago, valued at $715.8M (down 2%). Through the first five months of the year, exports were up 6% to 1.29M mt, while export value was 7% above last year’s record pace at $3.6 billion. Pork shipments to Mexico trended a bit lower in May but that followed a record April performance, says Halstrom. Even at that, export value to Mexico still topped $200M. U.S. pork also posted another great month in South Korea and exports to the ASEAN region were the largest in three years, he says.
Japan, Mexico and Taiwan helped push May beef export value over $900M, says USMEF. Despite the persistently weak yen and other economic challenges, Japan has maintained its position as the leading volume destination for U.S. beef in 2024. May beef exports to Japan were just under 21,000 mt, up 9% from a year ago, while export value climbed 20% to $164.1M. For January through May, exports to Japan were still 3% below last year in volume (104,712 mt) but export value increased 5% to $796.8M. The weak yen’s silver lining is that it has contributed to a surge in foreign visitors, bolstering Japan’s foodservice and hospitality sectors. Tourists arriving in Japan in May jumped 60% from a year ago and topped 3M for the third consecutive month. Tourism officials project that total arrivals this year could surpass the 2019 record of 31.88M, says USMEF.
Mexican Demand Continues Momentum
Demand for U.S. beef in Mexico continues to gain momentum, says USMEF. May exports increased 9% from a year ago to 18,793 mt, while value climbed 17% to $109.8M. Through May, exports to Mexico increased 17% to 96,323 mt, while value soared 23% to $564M. This included more than 50,000 mt of beef variety meat, up 19% from a year ago, valued at $136.6M (up 13%). Mexico is the largest volume destination for U.S. beef variety meat, taking large volumes of tripe, lips, livers, hearts and kidneys, says USMEF.
Beef shipments to Taiwan have trended lower in 2024, says USMEF. But May saw a rebound in export value at $63.2M, up 6% from a year ago and the highest since August. May volume was 5878 mt, down 4% year-over-year. For January through May, exports to Taiwan were down 12% from a year ago to 23,392 mt but value slipped just 2% to $254.7M. Despite a widening spread in the price of U.S. beef versus major competitors, the U.S. continues to dominate Taiwan’s chilled beef sector, capturing about 70% market share, says USMEF.
May beef exports to the ASEAN region reached 4646 mt, up 25% from a year ago and the largest since October, says USMEF. Shipments to Indonesia (1823 mt) were the largest since October, to Vietnam (585 mt) were the highest since January 2023 and to Singapore (587 mt) were the largest since 2010 and the third highest on record. Shipments to the Philippines (1457 mt) slowed from the previous month but were the highest since October. May exports to the region were valued at $40.6M, up 81% year-over-year and the seventh largest on record. January-May exports increased 18% in value to just under $125M despite a 17% decline in volume (14,977 mt). Fueled by record-large shipments of more than 1100 mt to Guatemala and strong demand in Panama, May beef exports to Central America increased 37% from a year ago to 1972 mt, valued at $13.6M (up 45%). Through May, exports to the region climbed 12% in volume (9464 mt) and 17% in value ($68M).
Export Volumes To China Fell
May beef exports to China/Hong Kong slowed compared to last year, falling 16% to 18,659 mt, says USMEF. But export value was down just 4% to $181.3M and export value to China alone was only 2% below last year at $146M. January-May exports to the region were down 10% to 88,446 mt. Export value was 4% below last year at $821M but is still on pace to approach $2 billion in 2024. Beef exports to leading value market South Korea slowed in May, falling 24% from a year ago to 18,063 mt, valued at $168M (down 14%). Through May, exports to Korea were 14% below last year’s pace at 96,960 mt but still increased slightly in value ($908.1M, up 1%).
Demand for U.S. beef continues to regain momentum in the Middle East, where May exports increased 19% from a year ago to 4481 mt, while export value climbed 26% to $19.8M, says USMEF. Through May, exports to the region increased 33% in volume (23,925 mt) and 35% in value ($106.3M), bolstered by larger beef liver shipments to Egypt and robust demand for muscle cuts in the United Arab Emirates, Kuwait, Qatar and Bahrain. Larger shipments to the Dominican Republic, Trinidad and Tobago, Cuba, Jamaica and the Bahamas pushed May beef exports to the Caribbean to 2846 mt, up 39% from a year ago, while export value increased 7% to $22.5M. January-May exports to the region increased 27% to 14,774 mt, valued at $121.8M (up 13%).
Beef export value equated to $410.94 per head of fed slaughter in May, up 3% from a year ago, says USMEF. The January-May per head average was $410.40, up 5%. Exports accounted for 13.8% of total May beef production and 11.5% for muscle cuts only, down from 14.7% and 12.1%, respectively, a year ago. The January-May ratios were 13.9% of total production and 11.6% for muscle cuts, each down about one half percentage point from the same period last year.
May Pork Exports Showed Broad-Based Strength
Although pork export volume to leading market Mexico slowed in May following record large April shipments, export value still increased and 2024 demand remains on a record pace, says USMEF. May exports to Mexico totaled 91,338 mt, down 6% from a year ago but value was 2% higher at $201.9M. January-May exports to Mexico reached 480,193 mt, up 7% from a year ago, while value increased 14% to $1.02 billion. While Mexico continues to shine as a destination for hams and other pork cuts for further processing, the U.S. industry has made impressive inroads in the country’s rapidly growing retail and foodservice sectors, with per capita pork consumption continuing to expand. Mexico is also a major outlet for U.S. pork variety meat, including for taco applications, says USMEF.
May pork exports to Japan held fairly steady with last year at 30,010 mt, while value was down 1% to $121.9M, says USMEF. January-May shipments to Japan were down slightly to 153,052 mt, with value steady at $618.2M. Similar to beef, the strong U.S. dollar has hampered Japan’s demand for U.S. pork but Japan is importing more frozen U.S. pork to partially offset the decline in ground seasoned pork and chilled pork. The rise in tourism, declining inventories and still high prices for European pork offer potential growth opportunities in the second half of the year, says USMEF.
Pork exports to Korea posted another robust performance in May, totaling 22,354 mt, says USMEF. This was up 6% from a year ago, while value increased 8% to $78.9M. Through May, exports to Korea climbed 35% above last year’s pace to 118,092 mt, while value soared 40% to $395.4M. The U.S. industry continues to capitalize on Korean consumers’ growing appetite for convenient, easy-to-prepare entrées and snacks, while U.S. pork is also gaining traction in the foodservice sector, says USMEF.
Despite lower shipments to leading market Honduras, May pork exports to Central America increased 11% from a year ago to 11,711 mt, while export value climbed 26% to $37.8M, says USMEF. May exports to Costa Rica nearly tripled from a year ago, while also gaining strength in Guatemala and El Salvador. January-May exports to the region increased 25% from a year ago to 64,161 mt, while export value soared 35% above last year’s record pace to $196.8M.
CATTLE ON FEED FORECASTS
Tyler Cozzens, Livestock Marketing Information Center: COF 101.1%, placed 99.9%, marketed 94.5%; Andrew Gottschalk, HedgersEdge.com: COF 100.1%, placed 89.9%, marketed 91.5%; Rich Nelson, Allendale Inc: COF 101.1%, placed 96.3%, marketed 92.2%; Lori Porter, Allegiant Commodity Group: COF 101.4%, placed 98.9%, marketed 90.9%: Mike Sands, MBS Research: COF 102%, placed 102%, marketed 91.5%
JULY COF IS LARGEST SINCE 2019
THE July 1 Cattle on Feed (COF) total might have been up slightly from July last year and might have been the largest total for the date since 2019. The total is a reflection of June placements that might have been close to or higher than a year ago and June marketings that were down about 8% due to two fewer slaughter days this June versus last year. Following the larger feedlot placements during May, June placements are projected at 1.715M head, 102% of last year and the largest since 2020, says Mike Sands, MBS Research. But despite the year-over-year increase, projected June placements are seasonally much smaller than a month earlier, down about 330,000 head, and are likely will be followed by a seasonally small volume in July as well, he says.
These smaller seasonal volumes still point to seasonally smaller fed cattle supplies late this year and into early 2025, says Sands. But significant year-over-year declines in fed cattle supplies are doubtful during the last half of the year. January-June feedlot placements are estimated about 2% smaller than last year but placements over 800 lbs were nearly 2% larger than a year ago. These larger heavier weight placements, coupled with a larger July 1 feedlot count, suggest July-December fed cattle supplies likely will exceed last year as well, he says.
The larger placements and smaller marketings during June translate into a July 1 feedlot count near 102% of last year, says Sands. The total was about 200,000 head larger than a year ago and the largest since 2019. Those cattle will provide the bulk of fed cattle marketings during the balance of the year. The relatively large placements during the first half of the year suggest little likelihood of any significant heifer retention during the period and perhaps an understatement of inventories at the start of the year. The number and proportion of heifers on feed at mid-year likely will reinforce that notion. With the industry part way through the breeding period for next year’s spring calf crop, the odds favor at least a modestly smaller 2025 calf crop, which in turn suggests that smaller fed cattle supplies will extend into 2027, he says.
Analysts’ estimates of the COF total range from 100.1% to Sands’ 102% of a year ago. The July 1 COF total was an estimated 11.254M head, essentially unchanged from the prior year, says Andrew Gottschalk, HedgersEdge.com. This was 118,000 head below the previous five-year average and 226,000 head below the previous July peak made in 2019. The decrease in total COF from January 1 to July 1 was 676,000 head, versus a decrease of 503,000 head during the previous five year average, he says.
Regarding carcass weights, Gottschalk says cow weights are up 38 lbs from last year. Seasonally, weights tend to bottom by mid-June and trend higher into the late-November/December time period. The seasonal increase in carcass weights this year should be much less than normal, given the record high starting point at this time of the year. Monthly placements are likely to continue declining, reflective of the reduction in this year’s calf crop, which is estimated to be down 675,000 head. As such, the combined total reduction in supplies outside feedyards on July 1 could approach 1.1M head, he says.
CARGILL STRIKE ENDS: Cargill’s beef processing plant in Guelph, Ont., resumes operations after a 41-day strike that began May 27. Union employees on July 7 ratified a new collective agreement with Cargill. The new deal meets workers’ demand for a pay increase, specifically an additional C$3.75 per hour over the course of the agreement, which includes C$2 per hour in the first year. Workers will also receive a contract renewal incentive payment of C$500. Cargill also agreed to increase dental coverage and other benefits.