MARGINS for fed beef processors turn negative again after being positive for five consecutive weeks from late August. This is because packers have paid more for fed cattle over the past three weeks while boxed beef values have declined sharply. Cattle remain in strong hands and cattle feeders appear to have ample leverage over packers. Cutout values meanwhile are still looking for a bottom. The cutouts might begin to benefit from an expected increase in seasonal demand should export business begin early, say analysts. If this fails to materialize, the beef cutouts might continue to struggle into mid-October, they say.
The week before last saw the 5-area steer price average $184.01 per cwt live. This was up $1.90 per cwt from the prior week. The dressed price averaged $290.41 per cwt, down 20 cents. The same week saw the national comprehensive boxed beef cutout (cuts, grinds and trim) average $303.96 per cwt. This was down $4.14 per cwt from the prior week and down $13.67 per cwt in four weeks. Export sales that week represented only 6.8% of the total volume of 6767 loads. Spot market sales represented 29.9%, formula sales 54.5% and forward sales 15.6%.The Choice cutout the first four days last week fell by $3.82 per cwt to $296.37 per cwt.
Retail Beef Price Is Record High
Price inflation is declining in some parts of the economy, which prompted the Federal Reserve to drop its interest rate levels by one half of a percent. But retail beef prices in August increased rather than declined. USDA’s All fresh beef price averaged a record $8.16 per lb, up one cent from July and up 4.3% from August last year. The Choice beef price averaged $8.52 per lb, up nine cents from July and up 3.5% from August last year. Ground beef prices in August averaged $5.58 per lb, up eight cents from July and up 9.8% from August last year. Pork prices averaged $4.90 per lb, up two cents from July and up 1.4% from August last year.
Chicken prices in August averaged $2.44 per lb, up one cent from July but down 3.6% from August last year. In posting a price decrease, chicken provides the optics of value and continues to gain market share versus beef and pork as consumers alter their purchases, says Andrew Gottschalk, HedgersEdge.com. While beef remains the preferred meat by most consumers, the absolute price difference between the competing meats favors the lower-priced items in an income-squeezed environment, he says.
However, a positive or even wide retail margin allows for two demand positives to develop, says Gottschalk. Retailers can drop their prices, which will encourage purchases on a more consistent basis as consumers adjust their value-based decisions accordingly. Positive margins at retail can also spur promotions, attracting consumer foot traffic with deals enticing the purchases. This type of reaction can spur excessive fill-in type business, stabilizing or advancing wholesale prices and the live cattle price levels willing to be paid to meet the demand. A combination of these two simultaneously can set price positive results in motion, he says.
Seasonally, beef demand is expected to improve during October, benefiting from some seasonal holiday export business, says Gottschalk. But adding to the demand uncertainty and risk is the latest Conference Board index on consumer confidence, which suffered its largest decline in three years, he says. The index fell in September to 98.7 from an upwardly revised 105.6 in August. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, fell by 10.3 points to 124.3. Concerns about current and future business conditions and the labor markets largely fueled the index’s decline, says the board.
LIVE CATTLE PRICES GO HIGHER
BOXED beef cutout values are still searching for an early fall bottom, as CBW noted in its previous story. But cash live cattle prices appear to have put in their low for this time of year. As noted, the 5-area live price the week before last averaged $184.01 per cwt. This was up $2.83 per cwt from the average of $181.18 per cwt the week ended September 8. This meant that cash price at the start of last week remained at a slight premium to futures prices. As in previous weeks, very little cash trade took place through last Wednesday. Just 825 head were reported sold in Iowa-Minnesota at $184-188 per cwt live. Trade however turned active in all regions Thursday morning, with prices up north in a range of $185-186 per cwt live or $290-295 per cwt dressed. Prices down south mostly averaged $185 per cwt live.
Carcass weights meanwhile remain well above last year’s levels and set two new records in the latest reported week. Steer weights in the week ended September 14 averaged 945 lbs, which was 3 lbs over the previous record of 942 lbs set the week of December 23 last year. They were 26 lbs above a year ago. Heifer weights averaged 852 lbs, which was 31 lbs above a year ago. Overall weights averaged 863 lbs, which exceeded the previous record of 860 lbs set the week before and was 34 lbs above a year ago. This added the equivalent of 25,595 head to that week’s kill, says HedgersEdge.com.
COF TOTAL REMAINS HIGHER
THE monthly Cattle on Feed (COF) total for feedlots 100 head and larger remains slightly above a year ago. The September 1 total of 11.198M head was up 0.6% on the same date last year and was 71,000 head higher. It was only 196,000 head below the record high for September 1 set in 2020. Feedlots placed 1.975M head in August which was down 1.3% from last year. Marketings, which reflected one less slaughter day in the month versus last year, totaled 1.818M head, down 3.6% on last year.
Regarding placement weights, the under 600 lb category saw 20,000 fewer cattle placed than last year (395,000 head). The 600-699 lb category saw the same number placed (305,000 head). The 700-799 lb category saw 200,000 fewer placed (435,000 head). The 800-899 lb category saw 8000 fewer placed (485,000 head). The 900-999 lb category saw 20,000 more placed (265,000 head) and the 1000 lbs plus category saw the same number placed (90,000 head).
Two states, Arizona (down 6%) and Kansas (down 5%), had fewer cattle on feed than a year ago. Texas had the most cattle on feed with 2.750M head, with its total up 10,000 head from a year ago. Nebraska was second with 2.320M head, up 50,000 head, and Kansas was third with 2.280M head, down 130,000 head. Four states placed more cattle than a year ago. California placed 27% more, Colorado 29% more, Idaho 43% more and Oklahoma 16% more. Texas placed 6% fewer cattle, Nebraska 3% fewer and Kansas 3% fewer. Only California, Idaho, Minnesota and Oklahoma marketed more cattle in August than last year. Texas marketed 4% fewer, Nebraska 5% fewer and Kansas 5% fewer.
Front-end fed cattle supplies project to remain above the prior year into the first quarter of the New Year, provided monthly harvest and marketing estimates are achieved, says Andrew Gottschalk, HedgersEdge.com. The change in numbers for this category from October through February is projected to increase by 13,000 head. This is contra-seasonal to the previous five-year average decline of 89,000 head. This category is projected to peak during November and trend lower into the first quarter of 2025. There is a defined seasonal increase from February into March, with the previous five-year average posting an increase of 324,000 head. This year the increase was 348,000 head. In 2025 it is projected to be only a 115,000 head increase but the supplies start from a more elevated level, he says.
USDA FORECAST: USDA’s Economic Research Service (ERS) raises its 2025 beef production forecast by 180M lbs from last month to 25.625 billion lbs. Production is raised on higher expected fed cattle slaughter and heavier expected carcass weights, says ERS.
CONSUMER DOLLARS FLOW BACK TO RANCH
WHILE parts of the U.S. still grapple with dry conditions, the overall situation has dramatically improved versus this time last year, especially in the middle part of the country.This contrasts with thedominating theme in 2023’s Drovers State of the Beef Industry report, which was weather. The reprieve has provided producers some opportunity to focus on other parts of the business, writes economist Nevil Speer for Drovers. The topic that is of foremost significance is the market and record prices have a way of doing that. Supplies are increasingly tight but much of the market’s strength is attributed to resilient beef demand. Last year’s per capita beef spending totaled $461, a new record by $14, he says.
The record All Fresh beef retail price in August of $8.16 per lb was especially encouraging given that consumers’ No.1 complaint about inflation involves food prices, says Speer. The business is such that consumers have had every opportunity to trade down when it comes to their protein options. But they continue to choose beef even at higher prices. These consumer dollars are flowing back into the production sector. As a result, fed cattle prices have established another set of new highs in 2024. While overall beef production has waned due to lower cow slaughter, fed beef production has been running ahead of year ago levels. This means higher prices on bigger volume. All of this is a testament to the importance of building and maintaining efforts to boost beef demand. The industry’s success toward improved quality and consistency, coupled with meaningful promotions, is paying dividends for U.S. producers, he says.
Nevertheless, while the fed beef supply has held steady, it is likely that trend will be pressured in coming years, says Speer. The beef cow inventory started the year at 28.2M head. The January 1 feeder cattle supply outside feedyards was just 24.2M head, down 5% from 2023 and off 10% from the recent peak of 26.6M head in 2017. Numbers will therefore remain tight in the coming years and they will be further exacerbated if/when producers decide to hold back heifers to rebuild the cowherd. At that point, the industry is likely to see the peak in prices. Just how high cattle prices can go remains to be seen. But the battle for margin between the feedyard and the packer, and ultimately the retail and food service sectors, will be especially important to watch. In the interim, cow-calf producers hold the cards and will continue to benefit from solid prices, allowing their sector to string together multiple years of unprecedented profits, he says.
Last but not least, the beef-on-dairy trend continues to influence the industry, says Speer. It is proving to be an important contributor to the beef sector. In light of waning beef cow numbers, these calves will make up a larger share of fed beef in the next several years, as dairy cow numbers remain relatively steady. As a result, many feedyards are working to improve the quality and consistency of their beef-on-dairy supply chains. All of this means increased feedback to suppliers as the calves are easily traceable. Much of that influence will likely creep into the native cattle supply chains, he says.
JBS ACTS OVER LABOR ABUSE CLAIMS
JBS SA takes several actions at its Greeley, Colo, beef plant after allegations of abuse and crimes against immigrant workers. Meanwhile, the United Food and Commercial Workers is calling on U.S. authorities to investigate. The union says workers at the Greeley plant have been subject to human trafficking, paying rent for squalid conditions, dangerous work conditions, threats and intimidation. As many as 500 Haitian and Benin workers may have been impacted. Some of the alleged violations were committed by a hiring manager and at least one associate who was not directly employed by JBS but had direct access to the Greeley plant, according to UFCW Local 7. The allegations were reported in a lengthy story in the Wall Street Journal last Wednesday. In response, JBS said it has put new human resources leaders in place at the facility, banned the non-employee from the plant and notified local authorities after becoming aware of what it called the “alarming allegations.” JBS does not charge team members or applicants for any pre-employment services, including transportation, application, pre-hire medical requirements, or housing, nor does it require them to live in any specific location, JBS said, referring to the allegations made by the union. It has also notified local authorities and will cooperate with any resulting investigation, it said.
USMEF WARNS OF A PORT STRIKE
THE US Meat Export Federation (USMEF) continues to put the issue of a possible October 1 strike of the International Longshoremen’s Assn (ILA) and negotiations with the U.S. Maritime Alliance (USMX) front and center. A strike at ports along the East and Gulf coasts would significantly impact the meat industry, says USMEF. The largest ports for U.S. beef and pork exports are on the West Coast, with three big ports there, but that doesn’t mean that the East and Gulf Coast isn’t important, says USMEF president Dan Halstrom.
Port Import/Export Reporting Service (PIERS) data provided by USMEF show that through July, 45% of waterborne U.S. pork exports were shipped through the East and Gulf Coast ports, along with the share of waterborne beef exports being 30%. You know that 30% might sound a little low but it doesn’t mean it’s not important, says Halstrom. That’s because there’s quite a high percentage of high value chilled beef that goes out from the East Coast, in particular to destinations like Europe and the Middle East, he says.
USMEF and 177 trade associations the week before last urged the White House and Congress to help bring the two sides together to avoid the port shutdown. Redirecting to the West Coast is a potential, very short-term solution but it’s by no means a long-term solution because it’s not just U.S. beef and pork, says Halstrom. You’ve got all sorts of commodities that use these same ports. The meat industry is challenged to export all of its product today using all the ports, so it cannot afford a shutdown in any part of the supply chain, he says.
Meanwhile, Colombia lifts its ban on U.S. beef exports to the country. It imposed the ban in July over concerns about highly pathogenic avian influenza (HPAI) in U.S. dairy cattle. The ban applied to exports of beef originating in 14 states. Halstrom thanked the U.S. government, including teams at USDA’s Animal and Plant Health Inspection Service, Foreign Agricultural Service and Food Safety and Inspection Service. USDA staff in Bogota in particular worked tirelessly to get these restrictions lifted, he says. USMEF is also grateful to Colombian importers and customers who remained loyal to U.S. beef during this difficult time and who voiced their concerns to the Colombian government about the interruption in trade The effective USDA engagement with other trading partners helped prevent similar trade barriers over HPAI concerns from extending and affecting additional export markets, he says.
While Colombia was the only destination to officially restrict imports of U.S. beef as a result of H5N1 findings in dairy cows, the impact on beef exports was substantial, says Halstrom. Before the restrictions imposed in April, Colombia was a promising market that averaged about $3M per month in U.S. beef purchases. In July, the most recent month for which data is available, exports fell to less than $850,000. USMEF looks forward to rebuilding U.S. beef’s presence in the Colombian market and meeting the needs of valued customers, he says. The U.S. is Colombia’s biggest supplier of imported beef. Shipments in 2023 were valued at $40M.
PROTEIN BECOMES CONSUMER OBSESSION
PROTEIN-packed products appear to be Americans’ new obsession. Snack aisles and dairy cases are now overflowing with high-protein products They include snack bars that are barely 2 ounces in net weight but contain 20 grams of protein. Ready-to-drink milkshakes feature 42 grams of what is called “protein fuel”. Earlier this month, the world’s first “super candy” launched across North America. According to its advertising, the candy boasts up to 100 times more protein than any candy on the market. Meanwhile, American men love protein in the form of meat so much that they are eating 40 ounces of it each week on average, despite the federal government’s recommendation of 28 to 33 ounces per week to lessen one’s chances of suffering heart disease, diabetes, and some cancers, says The Wall Street Journal. Americans consume about twice the daily amount of protein recommended by federal dietary guidelines. The popularity of keto and paleo diets has contributed to the trend of high-protein diets, says Cassandra Padula Burke, a dietitian nutritionist.