June 26, 2025
THE MARKETS
Sales volumes will remain small accompanying the small slaughter volumes expected next week. A few cattle sold in Kansas and Texas at $224-5 as packer become wary of waiting until Friday and some may need cattle for Friday’s kill. In the north a few trades also developed at $232 live and $368 dressed. These prices were $3-4 lower for the second week in a row.
Packers won the day this past week as new purchases were $5-7 lower and box prices sharply higher — choice cutout was up $17 cwt.. Slaughter volume for the week was 560,000 head compared to 558,000 the previous week and 616,000 last year. The large losses of the past few week were substantially trimmed. Chances are good that the weekly slaughter from this point forward will trend closer to 550,000 than 600,000 as packers attempt to deal with red ink. Next week will contain a holiday for the fourth of July.
CATTLE FUTURES. Futures are having difficulty defining a direction. During the course of any given day they are ranging up and down with ill defined bias. Traders can’t decide to favor the front or back end of contracts or even find a footing in the front spot month.
The discount in the deferred contracts is pricing in a plant closure. No one knows what plant will close, or the size of the plant, or when it will close. When a plant does close, it will allow packers to reduce the red ink that has been spilling most of this year. Live cattle operators will lose some of the benefit of too much processing capacity and the losses at the plants that subsidized gains in margin at the feedlot level.
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 994# up 5# from prior week and 18# 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 up .4% to 83.6% from the previous week. The current grading hovers 1% over last year after recently reaching an all time high this 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. Published reports show hamburger to be not only the most popular item on the meat counter but also the fastest growing. 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 box prices continue to show strength as the anticipated short slaughter next week plays into the minds of retailers who are staying in short inventory mode. A narrowing of the choice/select spread reflects the high quality grade nationally. Packers are limiting current pricing to immediate shipment indicating anticipation of more increases in box prices.
Replacement markets
The stubbornness of the markets to observe caution at record breaking prices, has been the hallmark of recent market reports. The elevated risk profile of current purchases presents a challenge not seen in recent history. Faith that somehow the market will bail out breakevens topping $220 seem unrealistic. This projection assumes the beef processors will continue to compete for cattle with some losing as much as $300/head. The pool of replacement cattle continues to dwindle but the show must go on.
The cost of a dead calf is weighing on the market this summer. Death loss calculations are always a feature of evaluation for any purchase of cattle. A surprise in the death loss category has ruined many purchases. The blame game starts and friction between buyers and sellers often result in discontinued relationships. Sky high prices on all purchases sends a warning to all operators to take special care in evaluating the health risks.
Modeling the purchase of light cattle for a grazing program has taken a new twist. Most operations, whether leased or owned, assume a grazing fee per month or per pound gained. Putting the numbers together for a grazing profile returns losses even if the grazing is for free. How many people would choose to graze if someone gave you the pasture for free and you still lose? This means in a year of abundant forage some pastures will remain empty and others will fill with breeding stock.
The drought monitor continues to favor herd expansion. Only the desert southwest remains in drought. April/May/June rains have been generous across the plains. Following the cool rainy weather will be summer heat and wind. Chances are good that the slow rebuilding of the nation’s cattle herd is now morphing into full throttle rebuilding and those forecasting recovery several years away will find it happening sooner rather than later.
Compared to last week: Feeder cattle and calves mostly steady. Un-weaned calves 5.00-10.00 lower. Demand moderate to good. Limited demand for those short weaned or un-weaned calves. Summer’s heat is upon us and definitely limiting demand for those calves. Weather has dried up enough to get farmers in the field harvesting wheat but chances of rain are back in the forecast for later in the week. Quality mostly average. Supply included: 100% Feeder Cattle (48% Steers, 48% Heifers, 4% Bulls). Feeder cattle supply over 600 lbs was 61%.
Compared to last week: Steer calves steady to 3.00 lower except 500-600lbs 10.00 higher. Several buyers had a 5 weight steer deal today. Heifer calves unevenly steady. Demand moderate to good. Quality average. Buyers are showing less demand for unweaned calves this week. Hot and dry conditions across the region this week are providing farmers a window to cut wheat or bale hay. Supply included: 100% Feeder Cattle (46% Steers, 44% Heifers, 10% Bulls). Feeder cattle supply over 600 lbs was 24%
Feeder Cattle Futures. Feeder futures softened at mid week.
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. Grains are lower. Dryland wheat production in the southern plains is excellent pushing wheat into many feed rations. Favorable growing conditions for corn are reported in most all areas. Corn basis levels in Guymon, Oklahoma are at $.90 — basis the September contract.
THE CORN BALANCE SHEET
Expectations are for this year’s corn crop to set all time records of up to 16 billion bushels. Most crop years have a crop scare during the season, but none has surfaced so far this year. The key number to watch for market guidance is the corn ratio of stocks to use. This ratio measures the percentage of production left over at the end of the crop year. In a normalized year a number the market seems to be comfortable with is 11%. This is the residual on the corn balance sheet.
This year, during a time when attention has focused on trade policy and tariffs, the anticipated stocks to use number has fallen for the current crop year from 11 to 9 percent. The reason has been strong export demand for corn combined with domestic demand for corn as feed and as an input for ethanol production. Exports of corn in one recent week were the second largest ever recorded.
Mexico remains the largest buyer of U.S. corn and the prospect for future purchases is robust. The reason is simple – the border is closed, and Mexican cattle are forced to remain in Mexico finding their way to market through Mexican channels that include feedlots. The effort to produce the most desirable beef product is a grain fed carcass that can be exported to the United States or sold domestically replacing imported U.S. beef.
The shortfall of beef in stores will find some replacement in pork and chicken which means more feed for both meats. Cattle feeders also are maximizing each animal by extending the feeding periods and carcass weights. Corn prices are down, but expect brisk demand for corn in the coming months.
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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