APRIL 1, 2025
THE MARKETS
President Trump will explain the new tariffs in a Rose Garden press conference tomorrow. Expected is the unexpected. Economic experts supporting Trump’s tariffs and budgets are now forecasting some of those measures may take us into a recession. The indescriminate spending of the past few years is not sustainable and bringing the budget back in line will be painful but necessary.
Show lists were mixed with show list up in Texas, flat in Kansas and smaller in Nebraska. Asking prices will be higher despite the weak commodity prices to open the week. The USDA corn report estimated this year’s corn plantings at 95 million acres — up four million from last year.
The end of last week produced a crazy day that started with a small group of steers in Iowa selling for $222. This was followed by prices all over the board. In the north, the bulk of live sales were $213 to $214 or $1-2 weaker. Dressed prices, however, ranged from $235-$245 with the tops $10 higher than last week. Kansas and Texas sold cattle $209-$210 mostly steady to $1 softer with the previous week.
Processors slaughtered 609,000 cattle this past week up a whopping 49,000 from the previous week, and also up 27,000 from last year. This is the largest slaughter of the past two months and was absorbed easily by the retail trade whose purchases took box prices $7-10 higher for the week. This week was a win for processors who lowered production cost with the larger slaughter, held cash prices mostly steady, and enjoyed rising prices on box sales. 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.
AI BEEF LLC.
On April 1, the introduction of AI was announced to the cattle and beef industry. A consortium of high tech companies specializing in food production revealed the first attempt at artificial intelligence algorithms into mastering the trajectory of price points in all sectors of beef production. The initiative has been in development for two years and now has been proven effective in forecasting the prices for all cattle and beef for up to six months in advance with 97.3% accuracy. The service is available by subscription only and monthly subscriptions start at $8700/per module. The modules include calf prices, yearling prices, fed prices and boxed beef prices.
CATTLE FUTURES. The news from the economy weighed in on futures. A higher than expected inflation report sent stocks and commodities lower. Contracts made new life of contract highs last week and a week long battle between technical traders and fundamental traders developed sending volatile prices up and down all week.
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 915# up 2# with prior week and 30# 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 .5% at 85.80%. The current grading hovers at the top end of the annual grading chart.
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. Box prices firmed in early week trading. The gains were accomplished with a large increase in last week’s slaughter volume indicating broad support from retailers for beef cuts. This may have been helped by export demand in front of the April 2nd date for setting tariffs. With almost 86% of cattle grading choice this is a large improvement to packer margins. This time of year the choice/select spread starts to widen.
Replacement markets
High prices always improve volumes of cattle offered for sale. April is the time of year when summer pastures load up and feedlots refill as fall placements sell to the processors. 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 late year. The most appropriate adjective for the replacement trade has been “scrambling” as buying interest has propelled field reps to all points in the country attempting to line up spring needs.
Summer grazing is upon us. Stocker operators looking to furnish calves for summer grass are finding short supplies. The available offerings are sky high in price taking much of the incentive to graze away unless the operator is willing to bet on larger price increases next fall. Enter two way cattle. These historically have been 500# and 600# cattle placed on grass to return to the feedlot weighing 800+. This year some operators are purchasing 700# animals for summer grazing promising to return them weighing 900# to the feedyard.
The drought monitor continues to favor herd expansion but the rains never fall evenly across all regions. Computer modeling of weather patterns are done by several services and as AI programs interpret the data, those models will compete for accuracy. Currently European weather models compete with our own models and sometimes those models differ. April will be critical towards starting summer grass pastures and spring crops in the plains.
Compared to last week: Feeder steers and steer calves steady to 5.00 lower. Feeder heifers and heifer calves steady to 5.00 higher except 500 -700lbs 1.00-5.00 lower. Demand moderate to good. Quality average. Rain is forecasted for later in the week. CME feeder cattle are trading lower. Supply included: 100% Feeder Cattle (52% Steers, 45% Heifers, 2% Bulls). Feeder cattle supply over 600 lbs was 69%
Feeder Cattle Futures. The feeder contracts were lower.
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. USDA is forecasting a 4 million acre increase in this year’s corn planting. This will set the total acres to near 95 million acres. Corn prices barely responded to the report, but possible leaks of the USDA report weakened corn during the last week. Corn basis levels in Guymon, Oklahoma are at $.80 — basis the May contract.
LIVING WITH UNCERTAINTY
Those operating in the ag space are no strangers to taking risks. It is second nature, and most carefully laid plans are often subverted by unexpected changes. Assessing and measuring those risks is part of everyday business and those successfully managing the risks survive and those that don’t fall by the wayside.
Cattle operations deal with weather risks, price risks, basis risks, interest rate risks, health risks, feed cost risks, and reputational risks. Our assessments of each of those risks can materially impact the outcome. The variances from the original forecast when cattle are purchased require constant tweaking as the cattle proceed to finish. Some variances can be harmful enough to upset the apple cart. Fortunately, the direction of some risks can turn favorable but all risks require constant vigilance.
Today’s operating environment has something new in the mix, uncertainty. Uncertainty involves a broad array of outcomes that are either unknown or unknowable. President Trump makes statements like: “I have good news for our ranchers and farmers. They can now raise more beef and sell it to American consumers.” Hidden within this statement is confusion. Good news for beef producers is larger margins. Bad news is the loss of our export markets that are necessary to the current structure and without which beef prices will fall.
Tariffs and trade policy are at the heart of our industry infrastructure. Disrupting the structure of trade can roil the markets. In today’s political world, It is impossible for operators to know where trade policy and tariffs are going or how new policies will impact the markets. The President makes daily statements posturing our future with threats and bluffs. The repercussions of some of those threats are unknown. Political signals to the industry should be accompanied by a well laid map of where trade policy is going for our industry. Chaos in the marketplace is good for noone.
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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