THE start of the annual grilling season is usually the most optimistic time of the year for the U.S. beef industry. Beef demand historically increases in May from April and live cattle cash prices generally get a lift as a result. But concerns about the cattle supply and beef demand are growing, not diminishing. Uncertainty about demand is the biggest concern for industry analysts. But they are also worried about carcass weights and the fact that fewer cattle are being marketed each week than should be in relation to front-end supplies in feedlots. It appears that extremely negative packer margins continue to keep a lid on weekly steer and heifer slaughter.
As the markets begin May, there are more questions than answers regarding the outlook for the cattle complex, says Andrew Gottschalk, HedgersEdge.com. Most importantly, beef cutout values have failed to respond seasonally entering the best beef demand of the year. From the last week in April to mid-May, the ten-year seasonal advance for the Choice beef cutout value is 6.1% (Editor’s note: it averaged $297.99 per cwt the week before last so such an advance would take it to $317.39 per cwt). Its failure to advance would not bode well for beef demand, he says. The beef cutout values during April failed to stage any seasonal gain. Was this a precursor of what is to come in the weeks ahead, he asks.
Middle Meats Are Not Increasing
The comprehensive boxed beef cutout the week before declined for the fifth week in a row and was below last year’s levels for the second time. It averaged $299.19 per cwt, down $1.69 per cwt on the prior week and down 0.9% on the same week last year. Spot market sales accounted for 28.4% of the total volume and formula sales represented 53.1%. Forward sales represented 18.5% and export sales represented 13.7%.
Part of the reason for the decline early in April was the bird flu’s impact on futures prices, says Kevin Grier of Kevin Grier Market Analysis and Consulting. Beef buyers stepped back out of concern for the impact on cattle pricing and beef demand. That is still a factor but to a lesser extent. The fact is that the middle meats are not seasonally increasing. In fact, they are decreasing, he says. That is likely a function of the very high prices at retail. In addition, given the higher wholesale cost, retailers are not featuring the middles. Buying will be completely done for Memorial Day and likely in large measure for Father’s Day. It will be surprising if the middles can come to life if they have not done so already, he says.
The only thing increasing in the cattle complex are carcass weights, which have registered a contra-seasonal advance for the past nine weeks, says Gottschalk. This trend is history-in-the-making for this time of the year. It is very unlikely that the ability to maintain the live cattle market is due to lack of front-end fed cattle supplies. Rather, the economics of adding additional pounds favors doing so, thus limiting current marketings. Marginal gain costs remain well below the selling price of fed cattle and break-evens for replacement cattle in many cases are above the current selling price of fed cattle. This is disrupting the expected seasonal flow of cattle fed cattle offerings, he says.
Latest carcass data for the week ended April 20 showed that steer weights averaged 919 lbs, down 3 lbs from the prior week but up 27 lbs from the same week last year. Heifer weights averaged 852 lbs, up 1 lb from the prior week and up 27 lbs from the same week last year. Overall weights averaged 849 lbs, up 1 lb from the prior week and up 24 lbs from the same week last year.
BEEF CUTOUTS CONTINUE TO SLIDE
BOXED beef cutout values continued to slide last week despite the start of the grilling season. The cutouts are performing more poorly now than at any other start of the season for a long time. This is despite reduced steer and heifer slaughter versus prior years and a 2.6% year-on-year decline in beef production to April 27. As noted, the comprehensive cutout the week before last fell $1.69 per cwt from the prior week. The Choice cutout the first four days of last week fell $4.24 per cwt to $292.90 per cwt after averaging $297.99 per cwt the week before. The Select cutout fell $0.74 per cwt to $287.98 per cwt, versus $290.98 per cwt the week before last.
Choice and Prime’s share of total grading is abundant, says Kevin Grier of Kevin Grier Market Analysis and Consulting (Editor’s note: the combined share in the week ended April 20 was 84.41%). The Choice-Select spread firmed compared to three weeks ago but remains low relative to normal for this time of year, says Grier. Its weaker level might be due to weaker middle meat demand combined with abundant Choice supplies relative to Select beef. Steer carcass weights are huge and show no signs of seasonally declining, he says.
The stories on highly pathogenic avian influenza (HPAI) in dairy cows continue to weigh on industry pricing but to a lesser extent than three weeks ago, says Grier. Futures markets have managed to tentatively stage a recovery off the lows of the prior three to four weeks. The fed cattle market undertone has improved but remains under pressure. Fed cattle availability is forecast to be steady to higher compared to last year in the coming weeks based on the latest Cattle on Feed report. Based on USDA purchase data, packers’ spot market purchases were abundant the week before last. Nevertheless, it appears that their live inventory will still need to be topped up given the dearth of purchases in prior weeks. May contract signings were more than last year but less than a typical May. Packer margins meanwhile remain dismal. Non-fed slaughter is running on average 13% lower than last year, says Grier.
Live Cattle Prices Rebound
Cash live cattle prices meanwhile continue to recover after declining for four weeks in a row. The 5-area steer live price the week before last averaged $184.15 per cwt, up $1.48 per cwt from the prior week. The dressed price averaged $294.39 per cwt, up $2.04 per cwt. The live price put in its high so far this year of $189.56 per cwt the week of March 24, while the same week saw the dressed price high of $302.13 per cwt. Last week saw early trade Monday and Tuesday in Iowa-Minnesota, with 3493 head selling at $186 per cwt live. Tuesday saw 605 head in Nebraska sell at $292 per cwt dressed. Wednesday’s trade was active up north at $185-188 per cwt live or at $294-296 per cwt dressed. Only 895 head sold in Kansas at $186 per cwt live or at $295 per cwt dressed. Thursday morning saw only a light trade up north at $186-187 per cwt live or at $295 per cwt dressed.
USDA TESTS FOR BIRD FLU
USDA is collecting samples of retail ground beef in states with outbreaks of highly pathogenic avian influenza (HPAI) in dairy cows for testing but says it remains confident the meat supply is safe. USDA will analyze the ground beef to determine whether any viral particles are present, it said in a statement. USDA is also collecting muscle samples at slaughter facilities of dairy cattle that have been condemned to determine the presence of viral particles. It will also use a virus surrogate in ground beef and cook it at different temperatures to determine how the virus is affected, it said. The first 30 random samples of retail ground beef collected by USDA all tested negative for any contamination.
A month after cattle markets were roiled by the diagnosis of bird flu in dairy cattle, cattle futures and cash markets seem to have mostly recovered, says Derrell Peel, Oklahoma State University. Although there remain questions about some aspects of the disease, including exactly how the disease (now known as Bovine Influenza A Virus), is spreading between cattle, markets have settled into the knowledge that the disease has relatively minor impacts on cattle and has no human health implications for meat or pasteurized dairy products. Barring any new surprising information, cattle markets should move on with market fundamentals, says Peel.
NCBA CHIDES SENATE AG COMMITTEE
U.S. cattle producers praise the proposed Farm Bill put forward by the House Agriculture Committee but chide the Senate committee for not reaching out to cattle producers. The National Cattlemen’s Beef Assn (NCBA) is very pleased with the Farm Bill framework released by House Agriculture Committee Chairman Glenn Thompson, says NCBA’s Ethan Lane. Since 2023, Chairman Thompson has gone to great lengths to meet with America’s cattle producers in every region of the country and craft a Farm Bill that supports their unique needs. NCBA is especially pleased by the Chairman’s focus on voluntary conservation programs that are increasingly popular with cattle producers, animal health provisions that protect the U.S. cattle herd and investments in food security that support broader national security, says Lane.
Unfortunately, the Senate Agriculture Committee majority has failed to engage in the same level of outreach to real cattle producers, says Lane. Their framework reflects that lack of producer input. While there are some bipartisan elements to the Senate proposal, there are many provisions which would be harmful to livestock producers. NCBA looks forward to the House Agriculture Committee’s May Farm Bill markup and will continue engaging with members of the committees to advocate for the cattle industry, says Lane.
TYSON LIKELY HAD NEGATIVE BEEF QUARTER
TYSON Foods swung to a profit in its 2024 second quarter versus a $49M operating loss a year earlier. But its beef business likely had a sizeable loss after breaking even a year earlier. Tyson will report its results Monday morning for its January-March quarter. Analysts on Wall Street project that Tyson will announce quarterly earnings of $0.35 per share, representing a 975% increase from a negative $0.28 per share in 2023’s second quarter. Revenues are projected to reach $13.13 billion, indicating no change compared to the same quarter last year. The consensus EPS estimate for the quarter underwent an upward revision of 1.4% in the past 30 days, bringing it to its present level.
Tyson’s chicken sales reached $4.38 billion in the quarter, say analysts. The estimate indicated a change of minus 1.1% from the prior year quarter. Tyson Chicken in 2023’s second quarter had an operating loss of $258M. Analysts expect Tyson’s beef sales to come in at $4.54 billion. The estimate pointed to a change of minus 1.6% from the year earlier quarter. Fed beef processors in the first quarter had negative margins of nearly $63 per head, according to HedgersEdge.com data. Analysts forecast that Tyson’s International/Other sales reached $672.04M. Analysts’ assessment pointed toward Tyson’s Prepared Foods sales reaching $2.45 billion. The estimate pointed to a change of plus 1.3% from the year ago quarter. The consensus among analysts is that Tyson’s Pork sales reached $1.47 billion. The estimate indicated a year-over-year change of plus 3.4%. Tyson Pork had an operating loss of $33M in the 2023 quarter.
BATISTAS REJOIN JBS BOARD
BROTHERS Joesley and Wesley Batista were reelected to the JBS S.A. board of directors on April 26 at the company’s annual shareholders meeting. The shareholders voted for the number of directors to increase from nine members to 11 until the next annual general meeting in 2025, thus reinstating the Batista brothers for at least one term. JBS proposed adding the brothers back to the board in March 2024. This past February, the brothers joined the Pilgrim’s Pride board of directors.
The brothers in 2017 stepped down from their JBS positions due to accusations regarding Operation Weak Flesh, which exposed bribes paid to food safety inspectors in Brazil. The Batistas faced allegations that they and other JBS executives bribed nearly 2000 politicians. They were charged with corruption in 2018. But after a six-month period in pretrial detention and a ban from acting in management positions at J&F-owned companies, the brothers returned to their roles at J&F in 2020. J&F Investimentos, JBS’s parent company, is owned by the Batista family. It was founded in 1953 as the investment holding company for the family, which says that its plan is for J&F one day to be a publicly-traded investment company.
GLOBAL BEEF MARKET REACHES $450.5 BILLION
THE global beef market in 2024 will be worth $450.5 billion and its value is expected to reach $645.6 billion by 2033, at a CAGR of 4.5% during the forecast period 2024-2033. So says a new report from Custom Market Insights, a market research and advisory company. The global beef market is segmented by product type, distribution channel and region, says the report. The market is classified into loins, chucks, rounds, brisket ribs and others. Loins dominated the market in 2023 with a market share of 35% and are expected to keep their dominance during the forecast period 2024-2033. The beef industry is significantly impacted by consumer demand for multiple loin by-products, which are essential components of the business. Sirloins, tenderloins and T-bone steaks fetch high rates due to their tenderness and flavor, says the report.
These high-value cuts increase profits for cattle ranchers and processors, says the report. Furthermore, loin trimmings and ground beef made from loin cuts are popular among consumers looking for low-cost, delicious solutions. Moreover, loin by-products such as ribs and backbones are used in a variety of culinary applications, increasing the total flexibility and marketability of beef products. The demand for various loin by-products varies according to customer tastes, culinary trends and economic circumstances, making them important drivers of the beef market’s dynamics and profitability, says the report.
Rising consumer preference for protein intake is the first factor the report cites for the beef market’s growth. The increasing consumer appetite for protein consumption is a major driver of the beef business. As consumers become more aware of the necessity of protein in a well-balanced diet, they seek out high-quality protein sources such as beef. Beef is not only high in vital minerals such as iron, zinc and B vitamins but it also has a full amino acid profile required for muscle development and repair. The popularity of high-protein diets, fitness trends and the impression of beef as a satisfying and tasty protein source all add to its demand, says the report.
Beef’s Adaptability Makes It Popular
Beef’s adaptability in many cultures and recipes also makes it a popular choice among consumers looking for healthful and enjoyable meals, says the report. The National Cattleman’s Beef Assn, a contractor for the U.S. beef checkoff program, collects a wide range of consumer information about their attitudes and eating habits regarding beef. Interestingly, for the third year in a row, beef is listed in the top three proteins, whereas plant-based replacements and insect proteins score far below. Over 60% of consumers constantly see beef positively, with less than 15% viewing it negatively, says the report.
The increase in disposable income benefits the cattle industry in numerous ways, says the report. People tend to consume more high-quality protein sources such as beef due to its flavor and nutritional content. This increases the need for beef products. Customers with greater financial resources are more likely to purchase premium beef cuts and value-added goods, increasing beef producers’ sales and earnings. Furthermore, increased disposable income is frequently associated with urbanization and lifestyle changes such as dining out and convenience food consumption, which fuels the popularity of beef-based meals and packaged beef products.
The rising popularity of internet channels has greatly increased sales in the frozen beef industry, says the report. Online platforms offer consumers easy access to a large range of frozen beef products, allowing them to purchase from the comfort of their own homes and quickly compare pricing. Furthermore, internet shops frequently provide coupons, sales and bulk buying opportunities, which appeal to price-conscious customers looking for good value for money. The convenience of accessing product descriptions, customer feedback and nutritional data online boosts consumer trust in buying frozen beef products. Moreover, the worldwide accessibility of internet platforms allows consumers to obtain niche or imported beef items that may not be available in local brick-and-mortar retailers, says the report.