Last week’s federally inspected cattle harvest came in a bit larger at 620,000 head, the largest sum since the week of April 29. June, however, tends to be one of the largest harvest months of the year so this uptick is within seasonal expectations.
Analyst estimates of packer margins are indicating returns in the general range of plus $20/cwt. in recent days. This is a good sign for the supply chain, regardless of sector, given the importance of profitability to incentivize throughput with record-heavy carcass weights.
Fed cattle prices have been exciting lately as Nebraska and Iowa prices have topped the market in the $199/cwt. range on a live basis over the past two weeks. This level is a feature of a region that’s running short on market-ready cattle supply.
At the same time the price spread from north to south has been exceptionally large with a $188/cwt. to $190/cwt. range capturing much of Texas and Kansas prices. Kansas has been a bit of a split market from a price perspective with some of those cattle moving north to Nebraska and consequently priced a bit higher to match the destination.
June Live Cattle futures have struggled to keep up with the cash market and as of this Monday, the contract traded at $188/cwt. That was only good enough to match the low end of the cash trading range in Texas. This Wednesday June Live Cattle shot up $2.65/cwt. with the current $192/cwt. valuation just short of the contract high set back in September.
Last Friday’s June 1 Cattle on Feed report indicated a much higher number for May cattle placements in feedlots compared to analysts’ forecasts. The average of the forecasts came in at 98.7% of a year ago but the report stated placements in May were 104.3% of a year ago. May placements are typically quite large in comparison to other months and the two prior months were quite reduced compared to last year.
Summer Turns Up with Grinds
Beef market veterans know the onset of summer brings on the “dog days of summer” for beef consumption trends. This means that middle meat steak items, perfect for grilling during spring holidays, begin to take a backseat. As temperatures heat up consumers change focus toward lighter fare, focusing beef demand trends toward ground beef for burgers, especially ahead of Independence Day.
Although carcass cutout values continue to increase in recent data, they remain several cents below a year ago. This is not so for ground beef prices, as declining domestic cull cow slaughter only pressures 90% lean grinding material supply.
Fed steer and heifer cuts, primarily from the round primal, are being called upon to lend more support than normal to the lean grind supplies. This is evidenced by many weeks of elevated values on peeled knuckles and outside round, otherwise known as bottom round flat.
As well, the Choice/Select price spread is much more narrow than in 2023, currently at $16.64/cwt. Middle meats typically drive more value differentiation between the Choice and Select cutout values in late spring/early summer. Yet grinding material demand for lean end cuts has diminished the premium for Choice carcasses.
The Certified Angus Beef premium over USDA Choice is performing as expected in last week’s summary. The $16.42/cwt. wholesale premium for carcasses certified for the brand is equal to that of a year ago with latest weekly production tonnage 3% larger than a year ago.
This is largely the reason that fed cattle trades in Nebraska and Iowa have been, on average, valued near $10/cwt. higher than those in Texas for the past few weeks. The typical percentage of USDA Prime, CAB® Prime and traditional CAB® carcasses in the northern states runs much higher than in the south. While market-ready cattle supply is a basic driver of the historically large price difference, the market is also distributing larger premiums to cattle that can achieve CAB® and Prime at high percentages, rather than simply USDA Choice.
