The federally inspected slaughter total of 614,000 head last week was moderate when considering the prior week’s shortened production schedule for Memorial Day. Focusing on fed cattle alone, there was a more positive throughput total with the week’s 499,000 head of steers and heifers. That represented the largest total since the week of May 6.
The past few weeks, prices have been relatively steady in the fed cattle sector. Trade developed late on Friday to yield a slightly softer market with the northern region achieving $190/cwt. on a live basis ($301/cwt. Dressed,) while southern feedlots settled at $185/cwt. on light volume.
The carcass weight anomaly of 2024 seems like it will never relent. Latest confirmed weights show combined steer/heifer carcasses averaged 892 lb., a 34 lb. increase over the past year. Using last week’s total fed harvest number of 499,000 head, this yields 16.9 million additional pounds equivalent to 19,020 added carcasses for the week. The supply implications of this reality should not be overlooked.
Cull cow and bull harvest, on the other hand, has been running 12-15% smaller than a year ago. This continues to push 90% lean trim prices higher as grinders struggle to capture raw material.
Carcass cutout values were slightly higher last week, but the market generally took on a sideways tone. It should be noted that USDA’s weighed average cutout price quotes have been at least $15/cwt. higher than Urner Barry’s simple averages reprinted in the Insider.
Price spreads between quality grades are beginning to seasonally widen—as expected this time of year—but the magnitude of the spread movement is less pronounced than in recent years.
Robust Carcass Quality Implications
The contra-seasonal carcass weight trend, stemming from the February turnaround, remains one of the top supply chain factors in the 2024 fed cattle market. The most recent data indicates that increased steer and heifer carcass weights has filled the void of dramatically lower fed cattle slaughter numbers. Aside from the added carcass tonnage, the leap in carcass weight-driven by extra days on feed-has generated a noted shift in carcass marbling and quality grade achievement. We haven’t seen spring carcass quality this rich since the fed cattle backlog of 2020. As a matter of fact, the COVID backlog anomaly is the only supply chain event in history resulting in May/June quality grades as high as they are currently. Anomaly supply events often generate a mixture of positive and negative outcomes. From a pure supply viewpoint the “carcass weight effect,” as we might term the current scenario, has fulfilled production volume needs for downstream users. This is true to the extent that pure pounds of carcasses hanging in packing coolers exceeds that of a year ago, just below 2021 and 2022 levels. When the increase comes in the form of a 33% surge in Prime tonnage, the end-users who are focused on high-quality beef will benefit.
Certified Angus Beef ® brand production volume has been underpinned by heavy carcass weights as well, but to a much smaller extent. For the past 6 weeks, the Certified Angus Beef ® brand Prime carcasses have inched up to 14% of the brand’s total certified carcasses. The total USDA Choice grade percentage dipped below a year ago in April and May, giving up market share to the rising Prime grade. Yet the share of eligible, upper 2/3’s Choice carcasses meeting the brand’s standards held up well. Again, the extra carcass weight per head pushed total brand production tonnage to new heights for the April-May period. The cattlemen’s perspective differs from end-user’s experience, as carcass weight drives high-quality carcass tonnage upward. Lower fed cattle slaughter head counts have culminated in increased cattle prices, but that trend has hit a ceiling due to heavy weights. Larger premiums for highly marbled carcasses are historically a feature of the May-June market when the seasonal grade tends to drop, colliding with with heightened grilling demand. Yet, carcass quality remains abnormally high this year, supported by stubbornly sideways trending carcass weights. This has recently muted the magnitude of quality premiums paid on market-sensitive grids. The latest USDA report pins the Prime cutout premium at $19.83/cwt. over Choice. This is 30% smaller than a year ago but still ahead of the similarly large Prime supply periods of 2020 and 2021. Even though in late May Choice carcass tonnage was more closely aligned with recent years, the Choice/Select spread has been slow to climb this spring, but rapidly heating up with a move to $17/cwt. this week. Finally, rib prices struggled to show much demand through most of this spring. After a modest holiday demand uptick in May, they have now turned lower again. Tenderloins have been met with very soft demand at a 7% lower wholesale, year-to-date price point than a year ago. These cuts carry the largest premiums of any throughout the carcass, as quality grade and premium branded classification moves higher. Dampened demand for ribs and tenderloins has been a bit of a drag on cutout price spreads¾although they combine for less than 15% of total carcass weight.
