March 15, 2025
THE MARKETS
This past week’s cash market was sharply higher, especially in the south where cash cattle moved from an average of $197 to probably $203 this week. In the north live cattle sold mostly $205-206 — up $3-4 but dressed sales were mainly $325 — up $10. Packers reliance on grid and formula commitments often distort the volume of cash sales but they were light in all regions.
Processors slaughtered 587,000 cattle this past week up 9,000 from the previous week, and down 10,000 from last year. This is the sixth week of lower slaughter volumes, but this week improved volumes from the previous 4 weeks. March is a transition month moving to hopefully improved demand for beef. Box prices firmed but processors lost ground with higher input cost of fed cattle. The fed cattle portion of the weekly slaughter continues to make a larger percentage of the total slaughter than prior years with cow slaughter of both dairy and beef cows in decline. The shortfall of the cow slaughter has kept packers pulling from the fed cattle population to put together weekly slaughter needs.
CATTLE FUTURES. Futures posted gains in the front end as cash prices came in higher.
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 910# flat with prior week and 26# heavier than last year. Last year severe weather harmed cattle performance and diminished carcass weights. 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 up .4% at 84.80%. This was modestly higher than last year.
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.
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 is coming mostly from the grind that represents almost half of all beef sold. Winter weather pushes consumers to end meats and roasts and historically a spring warm up triggers demand for the middle meats and cook outs. The daily fluctuations of the primals represents seasonal changes and consumer preferences caused by pricing.
The Cutout. The cutout struggled to hold ground at week’s end. This time of year the choice/select spread starts to widen.
Replacement markets
One way to introduce volatility into the cash markets for replacement cattle is reduce volumes. Light receipts across the auction markets has reversed the downtrend in prices and pushed prices back to the previous nosebleed levels. Feedlots are beginning to understand the plight of the processors as replacement prices reach levels far short of price expectations expressed by the futures contracts for summer and fall. The offerings are light and expected to remain light through the balance of this year.
Cattle trade in dollars per hundred weight. As those prices rise, so do the incremental amounts of change that once were reported in fractions of dollars but now in dollars. In today’s markets it is not unusual for a marketplace to report market price increases or declines in $5 cwt. and $10 cwt. increments. Part of the change is volatility and part an adjustment to the new price levels. Ultimately, the relevant fact will be the percent change from the previous price level.
The drought monitor continues to favor herd expansion but the rains never fall evenly across all regions. Wintertime moisture is probably less important than spring moisture when crops are planted and grass begins to green for summer grazing. The current forecasts are all over the board with some calling for a dry spring and other reports trending towards normal rainfall.
Compared to last week: Feeder steers 5.00-10.00 higher. Feeder heifers 3.00-8.00 higher. Stocker steers and steer calves 5.00-15.00 higher. Stocker heifers and heifer calves mostly steady in a light test of calves. Demand is very good for all classes. Increased action from northern accounts. Timely rains and warmer weather is improving an already good demand for grass cattle. Supply included some heifers that were
previously held for replacements. Quality mostly average to attractive. Rains this past week reduced receipts some today. Supply included: 100% Feeder Cattle (58% Steers, 41% Heifers, 1% Bulls). Feeder cattle supply over 600 lbs was 74%
Compared to last week: Steer and heifer calves sold 15.00-20.00 higher. Demand good. Warmer temperatures mid week has grass grazers in a more active mood. Supply included: 100% Feeder Cattle (40% Steers, 56% Heifers, 4% Bulls). Feeder cattle supply over 600 lbs was 18%.
Feeder Cattle Futures. The feeder contracts were higher favoring the front end as feedlots scramble for replacement cattle.
The lack of liquidity in the feeder contract provides a perfect environment for prices to move too far in either direction. Poor liquidity leads to extreme volatility. Overdone directional price movements frequently require corrections and traders sense the vulnerability of the contract that needs to be cash settled but the contract index needs a redo.
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.
National Weekly Feeder Summary released on Friday of each week tracks the national prices by region for last week.
Grain Futures. Corn prices found a trading level between $4.50 and $5/bushel. Corn basis levels have moderated and new receiving facilities for repeater trains will bring grain more efficiently from grain surplus areas to grain deficit areas. USDA reports will begin to form a structure for this spring’s planting acreage in upcoming reports. Corn acres are expected to increase by 3 million acres but trade policies could unravel the plans. Corn basis levels in Guymon, Oklahoma are at $.90 — basis the May contract.
THE NEXT SHOE TO DROP
Dealing with large changes is almost becoming a habit. There is little danger of beef producers becoming complacent with the status quo because there is no status quo. Between government policy announcements and structural changes inherent in livestock cycles, adapting to new changing circumstances is a daily routine.
No fundamental need is more important than sourcing the animals necessary to fuel the supply chain of beef and signals are appearing that the supply is getting dangerously short. The months where placements were flat or one or two percent below last year are nearing an end. February may be an exaggerated placement month because it will compare to a relatively high placement a year ago, but placements may drop in double digits this next report.
The reasons are straightforward. The replacement pool is smaller, but holding back breeder heifers from that pool, will exaggerate the shortages. This will force some finishing pens to go empty and most grow yards to close. There is a limit to the amount of extra weight producers can add to animals held for finishing and total beef production this year is destined to decline.
The implications for the pricing structure for cattle are immense. Markets are made at the fringes where small shortages can turn into large price movements to the upside or downside with small surpluses. Trump’s goals are to lower food costs and those objectives conflict with the state of the marketplace. There is a price level for beef where consumers will turn to other alternatives. Producers will find extreme challenges during the upcoming months. These trying times will provide a case study for the inconsistencies and imperfections of human decision making.
CATTLE REPORT LIBRARY
Change is a necessity for any sustainable industry and sometimes necessary changes encounter obstacles in the form of stalwarts who refuse change. The Cattle Report has created a library page of opinions pieces published on these pages advocating fundamental and structure changes for the industry.
NOTE TO READERS
Sections of the newsletter are designed with hyperlinks to the appropriate source pages. The hyperlinks are in light blue within the report.
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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