A THIRD week of negative packer margins keeps a lid on cash live cattle prices also for the third week in a row. The negative margins ($63.50 per head last Thursday) are forcing packers to purchase fewer fed steers and heifers than expected. This was the case the week before last when steer and heifer slaughter was an estimated 484,000 head. This is despite the fact that ample market-ready supplies are in feedlots. The number of cattle on feed 150 days or more on August 1 is estimated to be 17% above the total last year, says HedgersEdge.com. It estimates that the Sept 1 total will be up 9%, the Oct 1 total will be up 6%, the Nov 1 total will be up 10%, the Dec 1 total will be up 8% and the Jan 1 total will be up 7%.
This means that front-end supplies project to remain above the prior year and also exceed the previous five-year average into the New Year, says Andrew Gottschalk, HedgersEdge.com. Through the first half of 2024, placements have declined by 405,000 head. Marketings have dropped by 205,000 head, a differential versus placements of 200,000 head. However, one cannot overlook the fact that at the beginning of the year, the cattle on feed total was already 203,000 head above the prior year. As such, there was no decline in the July 1 COF total versus the prior year. This condition has led to the front-end loading of the fed cattle supply, he says.
Live Cattle Prices Soften Again
The week before last saw the 5-area steer price average $193.67 per cwt live or $310.04 per cwt dressed. These were down $0.57 per cwt and $2.56 per cwt, respectively, from the prior week. The record prices so far this year are $197.09 per cwt live and $313.69 per cwt dressed. Last week saw an early cash trade in Kansas of 2604 head at $187 per cwt live FOB or at $197 per cwt live delivered. Another 517 head sold in Texas at $188 per cwt live. Wednesday saw a very light trade up north at $195 per cwt live or $308 per cwt dressed.
Boxed beef prices meanwhile continue their decline despite weekly production levels being down on a year ago (down 3.7% the week before last). The comprehensive cutout (cuts, grinds and trim) the week before last averaged $317.30 per cwt, down $3.49 per cwt from the prior week. The Choice cutout averaged $317.07 per cwt, down $5.18 per cwt from the week before. This was again far below the average price of domestic lean manufacturing beef (90CL), which averaged $375.75 per cwt. This was the tenth weekly record in a row. The comprehensive volume of 6584 loads included 28.6% spot market sales, 56.4% formula sales, 15.0% forward sales and 8.6% export sales. The Choice cutout the first four days of last week declined by $1.37 per cwt to $312.46 per cwt.
Carcass weights meanwhile remain well above last year’s levels although at lower levels than in previous weeks. Steer weights in the week ended July 13 averaged 915 lbs, down 1 lb from the prior week but up 22 lbs from the same week last year. Heifer weights averaged 831 lbs, down 3 lbs but up 23 lbs, respectively. Overall weights averaged 842 lbs, down 5 lbs but up 28 lbs from last year. This was the equivalent of adding 20,795 head to that week’s slaughter total of 604,573 head, says HedgersEdge.com. The weights, which are record high for this time of year, are the clearest indication of cattle feeders not being current in their marketings. Another measurement is that quality grading remains higher than this time last year despite the intense heat that hit much of Cattle Feeding Country in mid-June. Cattle in the week ended July 13 graded 9.61% Prime and 72.65% Choice for a total of 82.26%. They graded a total of 80.18% (7.87% Prime and 72.31% Choice) in the same week last year.
JULY 1 COF IS SAME AS LAST YEAR
CATTLE feeders have made no headway in reducing the number of cattle in their pens versus a year ago. The July 1 Cattle on Feed (COF) total of 11.304M head was up 0.5% or 61,000 head on a year ago. Cattle feeders placed 1.564M head in June which was 93.2% of a year ago. But they marketed only 1.786M head, which was 91.3% of last year, because of two less slaughter days in June this year versus last year.
Regarding placement weights, all categories had slightly lower placements than last year. The under 600 lb category saw 25,000 fewer cattle placed than last year (365,000 head). The 600-699 lb category saw 20,000 fewer cattle placed (255,000 head). The 700-799 lb category saw 30,000 fewer cattle placed (350,000 head). The 800-899 lb category saw 20,000 fewer cattle placed (349,000 head). The 900-999 lb category saw 20,000 fewer cattle placed (165,000 head) and the 1000 lbs plus category saw the same number of cattle placed (80,000 head).
Four states, Arizona (down 2%), California (down 2%), Colorado (down 2%) and Kansas (down 7%), had fewer cattle on feed than a year ago. Texas had the most cattle on feed with 2.790M head, with its total up 70,000 head from a year ago. Nebraska was second with 2.390M head, up 60,000 head, and Kansas was third with 2.220M head, down 180,000 head. Four states placed more cattle than a year ago. Colorado placed 11% more, Idaho 3% more, South Dakota 9% more and Washington 8% more. Texas placed 1% fewer cattle Nebraska 2% fewer and Kansas 22% fewer. Only Washington (up 8%) marketed more cattle than last year. Texas marketed 10% fewer, Nebraska 6% fewer and Kansas 13% fewer.
The July1 COF total was exceeded only by the COVID-19 back-logged year of 2020, says Andrew Gottschalk, HedgersEdge.com. The decline of 553,000 head from January is consistent with the seasonal trend. Seasonally, the COF total should attain a seasonal low during September. June placements were the smallest since 2016. June seasonally marks the lowest monthly placements of the year. Peak monthly placements generally occur during October. Adjusted for harvest days, June marketings mirrored year ago levels at 89,000 per day, he says.
Outside Supply Is Down 926,000 Head
There is no mid-year inventory report this year from USDA, says Gottschalk. But HedgersEdge’s best estimate for the feeder cattle and calf supply outside feedyards on July 1 is a reduction of 926,000 head from year ago levels. This is a record low for this category of cattle. This is a longer-term bullish scenario for feeder cattle and calf prices. But examining 750-800 lb feeder cattle prices at Oklahoma City versus Kansas fed cattle prices, one must recognize that at recent price levels, this supply decline may already be mostly discounted by the recent price spread, he says. This possibly means that feeder and calf prices have topped for this cycle. It also implies that feeder cattle and calf prices are unlikely to advance further as long as fed cattle prices are in retreat. For new price highs to be scored by feeder cattle and calves, fed cattle prices need to resume their uptrend, he says.
Slaughter steer prices in the 5-area marketing region established a new record for the week ending July 7 of $197.09 per cwt, notes USDA’s Economic Research Service (ERS) in its latest monthly Livestock, Dairy and Poultry Outlook. This was likely buoyed by a boost in packer margins, supported by strong comprehensive wholesale boxed beef values in the same week. Through the first half of 2024, the average weekly comprehensive value was 3% above the same period last year. Boxed beef prices have since pulled back from the high established the first week of July and slaughter steer prices have followed. The June average price for fed steers in the 5-area marketing region was $193.33 per cwt, almost $6 per cwt above the record monthly price set the previous month and almost $9 per cwt higher year-over-year, says ERS. Based on recent data and expectations of continued firm packer demand, it has raised its third quarter slaughter steer price $7 per cwt to $190 per cwt and has raised its fourth quarter price $2 per cwt to $188 per cwt. Its forecast for 2024 is thus raised to $186.86 per cwt, a year-over-year increase of more than 6%. Based on a faster anticipated pace of marketings in 2025, next year’s slaughter steer price forecast is raised $2 per cwt from last month to $191.00 per cwt, says ERS. More from ERS’s report on the next page.
Female Slaughter Remains Historically High
Heifer and cow slaughter remain historically high, says ERS in its report. In the first six months of 2024, the volume of federally-inspected heifer and cow slaughter was down 1% and 14%, respectively, on last year. Further, the percentage of heifers and cows in the slaughter mix in terms of the weekly average for January-June over past 20 years has declined year over year. But 2024 is still third highest in the last 20 years and the eighth highest since weekly slaughter data began in 1960. With the cancellation of the July Cattle report, data on producers’ intentions will not be available. But an update on the number of steers and heifers on feed was published in the July 1 Cattle on Feed report. (Steers accounted for 6.824M head of the 11.304M head on feed and heifers accounted for 4.480M head). These numbers should give some indication of whether large numbers of heifers were placed during a period when many breeding decisions are typically made, says ERS.
ERS meanwhile has raised its forecast for 2024 beef production by 65M lbs to 26.655 billion lbs but that is 1% below last year’s estimate, it says. Its latest forecast reflects updates to its second quarter forecast based on actual slaughter data through June. Given the pace of marketings in the second quarter, marketings are expected to be slightly faster in the third quarter. However, this is largely offset by fewer cows in the slaughter mix and so its third quarter beef production forecast is unchanged, it says.
ERS has raised its forecast for fourth quarter beef production as more fed cattle are expected to be marketed based on anticipated year-over-year higher second quarter placements, it says. Based on sales receipts reported in the USDA-AMS National Feeder and Stocker Cattle Summary, as well as relatively high feeder cattle prices during the month, expectations for placements in the second quarter are raised from last month, it says. Beef production for 2025 is projected higher than last month by 100M lbs to 25.465 billion lbs. Compared to last month, more placements are expected in late 2024 and early 2025, contributing to a faster expected pace of marketings in the first three quarters. However, the increase in marketings is partially offset by lower expected cow slaughter in the first half of 2025, it says.
Cattle Prices Are Projected To Be Higher
Forage conditions in the first half of 2024 generally improved from a year ago, corn prices are relatively less expensive and the prospect for higher fed cattle prices this year have supported strong feeder cattle prices, says ERS. Despite a 4% decline in calves available for placement at the beginning of the year, placements were supported to some extent by a 10% and 20% increase year-over-year in imports of feeder cattle from Canada and Mexico, respectively, through the first five months of the year. However, the expected supply for feeder cattle available in the second half of 2024 will remain tight, supporting elevated feeder cattle prices. In June, the weighted average price for feeder steers weighing 750–800 lbs at the Oklahoma City National Stockyards was $263.47 per cwt. This was a $10 per cwt increase from May and nearly $33 per cwt higher than June 2023, says ERS. In the first two weeks of July, the weighted average price was $265.69 per cwt. Accounting for recent price data and tight cattle supplies, it raised its third quarter price forecast for feeder steers $6 per cwt to $269 per cwt and raised its fourth quarter price forecast $5 per cwt to $268 per cwt. As a result, the 2024 forecast is raised to $258.50 per cwt, 18% above last year. That price strength was carried over into the 2025 feeder steer price forecast, which is $4 per cwt higher from last month at $263.00 per cwt, it says.
Per capita consumption of red meat and poultry is projected to decrease in 2025, says ERS. Disappearance is calculated by subtracting exports and ending stocks from total supply (beginning stocks, imports and production). After subtracting exports, the remainder can be divided by the population to achieve a measure of per capita domestic disappearance. In 2025, per capita disappearance of beef is projected to fall to 56.3 lbs from 58.2 lbs in 2024. Per capita disappearance of pork is projected to fall slightly in 2025 after increasing to 51 lbs in 2024. Broilers make up the largest share of meat disappearance per capita. Per capita broiler consumption is projected to increase from 101.3 lbs in 2024 to 102.0 lbs in 2025. However, this increase is not enough to completely substitute for losses in beef, pork and turkey consumption. Total per capita consumption of red meat and poultry is projected to decrease by 1.6 lbs to 226.1 lbs in 2025, say ERS.
NCBA HAS ANOTHER FAUX MEAT VICTORY
THE National Cattlemen’s Beef Assn (NCBA) has another victory in its battle against so-called faux meat. It confirms that its efforts to prevent ultra-processed, lab-grown protein from showing up in the diet of the American armed forces were successful. This follows news that the U.S. Department of Defense (DoD) is not pursuing lab-grown protein projects for human consumption, sys NCBA. It was the first and only cattle group to uncover this stream of DoD funding that could go toward lab-grown protein projects, and it was the first and only group to fight back, says NCBA President Mark Eisele. After weeks of engaging with Congress and speaking out against this plan, NCBA is thrilled to have DoD confirmation that lab-grown protein is not on the menu for the nation’s service members. These men and women make the greatest sacrifices every day in service to their country and they deserve high quality, nutritious and wholesome food like real beef grown by American farmers and rancher, he says.
PORK INDUSTRY CONTRIBUTES $62 BILLION
THE U.S. pork industry is a vital pillar of the nation’s agricultural economy, contributing more than $62 billion annually and supporting hundreds of thousands of jobs across the country. Producers are committed to delivering wholesome, affordable, sustainable pork products that not only feed millions of families but also drive economic growth and innovation in rural communities. So says Lori Stevermer, president of the National Pork Producers Council (NPPC) on the release of its latest economic contribution report. The pork industry supports an estimated 573,311 direct, indirect and induced jobs in the U.S. During 2023, more than 60,000 producers sold more than 149M hogs, which resulted in $27 billion in gross cash receipts, says the report.
The pork industry supports more than $37 billion in personal income and helps economic activity in other services like insurance, grain elevators, trucking and other rural-based business operations, says the report. around 25% of U.S. pork was exported in 2023, amounting to nearly 7 billion lbs of pork valued at $8 billion. Exports help support more than 143,000 U.S. jobs. The pork industry also purchases feed such as corn and soybean meal, which account for an estimated 52% of total U.S. production costs, with purchases valued at nearly $13 billion annually. Last year brought significant financial challenges for U.S. pork producers, marked by decreased gross cash receipts and a substantially higher average cost of production in 2023, says NPPC economist Holly Cook. Despite these hurdles, the report demonstrates that the pork industry remains a vital contributor to the nation’s economy and a key player in global trade, she says.
NPPC in its report also addresses issues and opportunities that it will focus on, including animal health, biosecurity and sustainability. Another challenge it highlights are worker shortages. Maintaining adequate staffing levels on farms and in processing plants has been increasingly difficult in recent years despite higher wages, bonus programs and competitive benefits, it says. While current tightness in the broader U.S. labor market plays a role, many labor challenges are tied to long-term demographic trends in rural America, says NPPC. Slowing U.S. population growth and increased levels of outmigration have caused populations of rural, farming counties to decline over time. The result is a shrinking and aging rural labor force that is increasingly unable to fill the workforce needs of the pork industry, says NPPC.
JBS PRODUCES MORE RENEWABLE FUELS
JBS S.A. over the past two years has directed 1.2M metric tons of animal waste toward renewable fuels, with plans to increase its efforts, it says. JBS operations in the U.S., Canada and Australia have been transforming beef tallow and pork grease into low carbon intensity fuels for the transportation and shipping sectors since 2022. In 2022, JBS converted approximately 465,000 mt of tallow and grease into Sustainable Aviation Fuel (SAF) and other renewable fuels. In 2023, JBS’s operations accounted for over 700,000 mt, it says.