May 5, 2026
MARKETS
Packers took on larger inventories last week. This allowed them to choose to wait into the week, but the future supplies are shortening and falling futures prices encouraged packers to buy a few cattle in Texas at steady prices of $255. Show lists are mixed with Texas flat, Kansas down and Nebraska up. It will be difficult for slaughter volumes to move higher given the red ink at the beef plants and packers would like to hold cash prices steady.
The diminished likelihood of a quick end to the war with Iran is weighing on the markets. Oil, grain, and interest rates are all moving in the wrong direction threatening our stable economy and individual household budgets. The administration is dangling a conclusion to the war to the public but much it behaves like a mirage — keeps disappearing. A prolonged war will harm the economy and beef will not be excluded.
The need to increase purchases in the spot market pushed cash prices sharply higher this past week. Live cash sales ranged from $250 to $256 with the bulk of trade at $255. Dressed prices ranged from $398-$405 with the bulk at $400. Gains were $9 higher live and $17 higher dressed.
This past week’s slaughter was 534,000 head — 5,000 over the previous week, and 29,000 under last year. The larger slaughter increased efficiencies at the beef plants. Box prices also make a contribution to improved margins but both were overwhelmed by the rise in input cost caused by sharply higher cash prices.
Uncertainty weighs on the livestock futures.
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 956#, 4# higher than the prior week, and 44# 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 .8% from the previous week at 89.9%. 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 transition from a historically soft seasonal period to the spring period that has featured improved demand. Demand normally improves following Easter. The high price of beef is always a threat or risk of damage to demand. To date it has been slight but there can come a tipping point and everyone is on the lookout for that point. Beef must suffer a loss of marketshare, not because of price, but simply because we are producing less beef.
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 higher to start the week. 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 reformating both the cuts and the marketing strategies to adjust to the new reality of beef offerings.
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.
Many speculators in cattle futures fail to understand the relationship between replacement prices in feeder cattle futures and grain prices. Deeper probes into that relationship will provide a more comprehensive knowledge of the interdependence between the two different commodities. The war has pushed both the absolute price of corn and simultaneously the basis. The price of corn has gone up as farmers switch from corn to soybeans — a less demanding crop for fertilizer. The basis has moved higher with the increases in transportation cost as gasoline and diesel prices shoot higher. These developments should devalue the price of feeder cattle.
The drought monitor is showing some areas of stress, but those areas are dwindling with needed rains. While rains have brought some relief to some areas of the plains and southeast, other areas remain far short of normal rainfall.
Compared to last week: Feeder steers steady to 4.00 higher. Feeder heifers, not as active and steady to 2.00 lower. Demand moderate to good as cattle futures are traded sharply lower. Steer calves under 500 lbs 5.00-10.00 higher; over 500 lbs 5.00-10.00 lower. Heifer calves under 500 lbs 10.00-20.00 higher; over 500 lbs steady. Quality average to attractive with several heavy weight feeders off fall and winter
pasture. Weigh-ups average to full with medium to fleshy conditions. Supply included: 100% Feeder Cattle (56% Steers, 0% Dairy Steers, 41% Heifers, 3% Bulls). Feeder cattle supply over 600 lbs was 78%
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. The possibility of an extended blockage of oil is pushing all the grain prices higher. 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 WAGES OF WAR
President Trump’s current plan is a “do nothing” strategy in an effort to ware down the declining economy in Iran. He will continue the blockade preventing oil to be exported from Iran using the Strait of Hormuz. There are routes over land but they are expensive and slow to develop revenues and observable from the air. Food prices and fuel are out of control in Iran and the pressures are waring on the Iranian people. The standoff is causing the markets in oil to move higher in the deferred contracts as traders see a possibility of an extended blockade.
In the meantime, we pay a toll for the stand off in the war in several ways. Energy and fertilizer are rising and will likely continue to go up while oil flow is restricted. Higher fertilizer is already causing some acres to transfer from corn to soybeans. The harm also will create harm for the price of beef that is already high. Increasing transportation costs will cause increases in all food prices.
As consumers find their monthly budgets stretched by rising gasoline prices, they will have fewer dollars to spend on food. Beef will be an easy item to target for elimination when making decisions for meat. Beef packers, faced with large operating losses, will be forced to trim the slaughter volume and the results will be more pressure for even higher beef prices.
At the macro level, war is expensive. The defense budget is now $1.5 trillion dollars at a time when the budget deficit is setting new records. The national debt is now equal to our gross domestic product. Against this environment it will be difficult to lower interest rates despite the President’s desire to do so. As business people across the country understand, the U.S. debt level is unsustainable.
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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