May 12, 2026
MARKETS
The week started like most weeks with a Monday morning sunrise but was quickly followed by a series of unexpected events. Surprisingly, packers jumped started the action early submitting $260 bids across all regions. Futures opened higher with the news and light trade was reported in most regions at $260 — $2-4 higher in the south and flat in the north. Mid morning Trump announced a decision to drop tariffs on imported beef. Future lost dollars in a matter of hours before staging a modest rally by the close. Late yesterday, following kick back from beef producers, Trump decided to delay the tariff relief plan.
Policy decisions in most governments are slow and cumbersome. Issues are developed at the lower levels by technocrats then funneled and vetted as they move upward. Stakeholders on all sides of an issue are given opportunities to express favor or disfavor then eventually a consensus emerges and decisions are handed to those at the top. In the Trump administration the decision making starts and ends at the top with quick on the fly decisions made and announced daily most by the President and often in a social media release. The decisions might go one way in the morning then change course by evening. In a world where many of these decisions are market moving, traders and stakeholders must beware.
Texas and Kansas sold cattle from $256 to $258 this past week. In the north, most live sales were $258-$260 with dressed sales $400 to $405. Northern sales moved premium to the south in an unusual move that may be more geared to time of day rather than regional differences in supplies.
This past week’s slaughter was 527,000 head — 7,000 under the previous week, and 34,000 under last year. The struggle at the beef plants with negative margins will create a negative backdrop for slaughter volumes in the upcoming weeks. They are finding little relief from the cash markets for fed cattle. Supplies of fed cattle will continue short while springtime demand in the grocery stores should improve.
A bullish open turned sour when Trump dropped tariffs on imported beef only to delay the action after the futures had closed.
Benchmarking. On Tuesday of each week, USDA releases a weighted average price report for all cattle sold the previous week. The report summarizes the distributed price levels for each category of sale such as Negotiated/Formula/Forward Contracts. Beef producers are able to measure the marketing price for their cattle compared to the national averages.
The Comprehensive Fed Cattle Weekly Report offers the most current information on the current status of fed cattle being harvested. The report is published each Tuesday and includes the previous week’s change in carcass weights and quality grading. The latest report shows carcass weights at 948#, 8# lower than the prior week, and 38# heavier than last year. The combined steer and heifer weights can easily be influenced when the proportion of steers to heifers in the weekly slaughter changes. Quality grade was down .5% from the previous week at 89.3%. The quality grade should begin a slow decline lasting into summer, but with out weights at record highs, grading will remain high historically.
The Weekly Steer and Heifer Grading Report is indicative of regional supplies of choice and prime cattle and often is determinative of regional differences is live price. The report is also reflective of the current status of fed cattle offerings in each area.
Forward Cattle Contracts: Forward contracts will always bear some relationship to the corresponding futures month closest to the delivery month for the cattle. Basis levels will move up and down as processors want to add to forward contracts or not. The driver in forward purchases of cattle will always be forward sales of beef. Packers will always be willing to take a price risk off the producer’s plate in return for an extra margin.
The overheated replacement market will slow the forward contracting of purchases this year. The discounted price in the deferred futures contracts will not encourage cattle owners to forward price cattle at a loss. Favorable forward basis levels can always incentivize sellers to enter into basis contracts to be priced later.
Formula and Negotiated Grids. The Price and Distribution Report delineates the various selling methods and net results.
The Cattle Contracts Report details the percent of contracts by volume of cattle and by number of contracts for selling cattle. Formula selling that was once the largest marketing method and still is, but is losing ground to negotiated grids where the premiums and discounts are set but the base price is negotiated.
Beef demand will now move into summer periods starting with Memorial day the end of May, Fathers day and the 4th of July — all periods for beef to play a prominent role. The high price of beef is always a risk for damage to demand and the continuing interest of the administration to lower beef prices is a constant threat. Beef must suffer a loss of marketshare, not because of price, but simply because we are producing less beef. With the grind dominating much of beef consumption, imports will continue to rise.
USDA Prime cuts are carving out a larger slice of the grocery offerings. Many retailers are struggling to market these cuts and often feature discounts to encourage consumption. This is a benefit for consumers who find bargains on premium cuts. Heavy carcasses also are changing the processing specifications for some cuts. Many of the rib cuts are now cutting off the lip to make the ribeye steaks smaller.
The Cutout. Box prices opened the week higher with select once again jumping in front of choice cuts. Some expectations are for improvement in the middle meats as we near spring and more cookout interest in steaks. Slaughter volumes will continue to be dictated by processing margins. The normal season pattern of increasing spreads in the quality grades may not develop this year as northern calves placed on feed come to market.
The impact of larger cattle and higher quality grade percentages has been to provide consumers with increased volumes of higher quality beef. USDA Prime now exceeds the quantity the USDA Select grade. An abundance of Certified Angus beef has caused gyrations in pricing that sometimes loses the premiums in the maketplace. Retail stores are adjusting the marketing strategies to the new reality of heavier cuts, higher quality grades, and delicate pricing variables between the cuts to assure turnover in the stores.
Replacement markets
May often brings spring rains to enable pasture conditions in the plains to accommodate summer grazing programs. Many cattle, moved early off winter grain fields in April, will likely create smaller movements in May. Placement of cattle on feed continues to show heavier placement weights on beef feeder cattle following the same pattern seen in the nation’s feedyards for finished cattle. Many of the reports fail to separate placements, into dairy/beef cross cattle or beef placements. Beef/dairy crosses are placed at lighter weights than beef yearlings that are placed at heavier weights. USDA has failed to update industry changes in many ways but noting the placement changes featuring dairy beef crosses is also creating gaps in understanding the rebuilding of the nation’s cow herd because of placement of dairy heifers is camouflaging the decline in placement of beef heifers.
The drought monitor is a map showing regions of the country under stress for lack of normal rainfall. The map is compiled over a period of time and the current status of many regions is often misrepresented by the latest map becaused of updated information. The latest map shows deeper stress in many areas but since publishing the map, rains have fallen in many of the stressed areas. Rains have brought some relief to the southeast and parts of Colorado and Kansas.
Compared to last week; Feeder steers 5.00-10.00 lower. Feeder heifers steady to 5.00 lower. Steer and heifer calves not well tested and very limited sales 10.00-20.00 lower. Several un-weaned calves included. Demand for feeder cattle turned moderate when cattle futures made the flip to trading into the red. Cattle futures started the day higher as slaughter cattle trade once again pushed thru record highs last
week. Boxed beef prices also opened the day higher. Cattle futures ultimately closed lower and remain very volatile. The realities of fewer cattle numbers continue to take a back seat to other things happening in the industry. On another note, some rains reached most all of the state over the weekend but amounts were anywhere from a trace to 2.5 or 3 inches. Quality mostly average. Supply included: 100% Feeder
Cattle (53% Steers, 44% Heifers, 3% Bulls). Feeder cattle supply over 600 lbs was 77%
Feeder Cattle Cash Index. The index is tracking the moves in cash prices.
Video and Internet Replacement Cattle Auctions. The movement from traditional private treaty sales to Internet auctions has been slow but steady. Producers have chosen this option as the primary marketing tool for most of the cattle offered in the replacement markets. The market that was once dominated by one firm has seen new competition from multiple trade platforms.
National Weekly Feeder Summary released on Friday of each week tracks the national prices by region for last week.
Grain Futures. Corn prices are moving higher as the war news favors an extended timeline. Transportation cost also are rising causing the basis on corn to increase. Corn basis levels in Guymon, Oklahoma are at +$.65 — basis the July contract.
THE LIQUIDITY PROBLEM
The question of what could cause the live cattle contract to post a $6 trading range within a 30-minute time frame, is not complicated to understand. A fundamental-based news story could and has caused this type of movement but more common of recent has been an event unrelated to market fundamentals and unknown to most in the trade. Computerized algorithms pick up a news story and AI analysis interprets the implications and converts quickly to order flow, and futures rise or dive accordingly.
To properly understand the value of liquidity to a market, one only needs to examine the largest of all commodity contracts – the Secured Overnight Financing Rate (SOFR) commonly used as a proxy for interest rates. Million dollar contracts numbering in the thousands trade around the clock listing in the bid/ask book — trading only a tick away from each other. Traders never fear a fill risk, you know the execution price by looking at the market. SOFR is the most liquid but is joined by other liquid commodities like index futures, oil, and gold.
The ag commodities have the corn market to serve as an example of high liquidity. Traders can reliably expect good order fills in most active contract months. Tapering down the liquidity list towards the bottom, you will find the livestock futures. Live cattle are more liquid than feeder contracts, but neither can withstand large order flow. A large part of the problem is contract construction. The live cattle contracts need to be cash settled but before it can be cash settled, a reliable settlement source must be established, and Mandatory Price Reporting fails that requirement. The feeder contract is cash settled but the index is poor and the settlement pool is not large enough or verified properly.
Beef producers frequently complain about outside forces moving the cattle futures markets. These traders are speculators who develop theories about market direction and act on them, bringing liquidity to the markets. Well-constructed commodity contracts encourage speculation from outsiders but provide the architecture for them to find liquidity for entrance and exit moves. Liquid contracts benefit all traders.
MANDATORY PRICE REPORTING
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EXPLANATIONS OF BREAKEVEN/CLOSE OUT TABLES
Regional differences in grain and cattle basises create a difficulty in modeling a national composite for current close outs or a proforma forward look at a breakeven. Readers should consider your own area for adjustments to these models. Most calculations are basis relevant prices in Guymon, Oklahoma.
CURRENT BREAKEVEN PROJECTION
The Cattle Report introduces the FEEDER METER. The report estimates profit or loss for currently purchased feeder steers and projects a result 180 days out. The chart is interactive and updated every 15 minutes in real time based on changes in futures markets in grain and cattle. Corn basis information is based on current trade prices adjusted every two weeks. Feeder prices are based on the USDA index price for 800# steers and fed cattle sales are $2 cwt. premium the appropriate futures contract.
CURRENT CLOSE OUT
The Cattle Report estimates current profit or loss on cattle placed on feed 180 days ago. This report generated from industry averages attempts to simulate a typical close out based on the feeder index for 800# steers 180 days ago. The close out assumes grain was purchased at market each month. Selling prices and interest rates are based on prevailing benchmark quoted prices. This chart will change weekly.
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