June 20, 2025
THE MARKETS
Trade has yet to develop in the south where $231 bids have been refused. In the north continuing trade at $237 was reported with some bids offered at that price for two week deliveries lending some evidence of confidence by packers in the stability of the market. Dressed sales of $376-7 continued. These prices were $5 lower.
At a time when producers are maximizing the animal carcass pushing the upper limits on weight, the signs of currentness were moving in the opposite direction. Carcass weights have declined for the passt three weeks. Grading has peaked and is moving lower. These signs point to more current conditions rather than cattle backing up. Short bought packers were forced into the market earlier this week because they lacked inventory.
Packers faced with declining supplies of fed cattle only managed to slaughter 558,000 head last week — 24,000 head less than the previous week. 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. This week’s slaughter was almost 50,000 under last year.
CATTLE FUTURES. Futures were closed. The spot month remains well under cash prices with the contract soon to expire and the next out month is $20 back with few signs of more cattle to come later this summer.
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 904# down 3# from prior week and 15# 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 1.2% to 83.1% from the previous week at 84.3%. The current grading hovers 1% over last year after recently reaching an all time high.
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 have posted large gains this week. Continuing small slaughter numbers are pressuring retail inventories. Retailers are anticipating pricing challenges at the meat counter, but still recognize the importance of keeping beef stocks available. Packers are limiting current pricing to immediate shipment indicating anticipation of more increases in box prices.
Replacement markets
The stubbornness of the markets to fail to observe caution at record breaking prices, has been the hallmark of recent market reports. The elevated risk profile of current purchases does not negate the need for some operations to continue business as usual. Many operations have increased equity in their businesses from generous profits and are willing to stake a risk on another go around despite projections that would make reasonable people wince. Some feel caught in a vise that resembles the beef plants where continuing business translates into negative margins. The pool of replacement cattle continues to dwindle but the show must go on.
Markets are made at the fringes and the loss of imports from Mexico is not a huge number but one that creates a gap in the pool of replacement cattle for grazing. Abundant rains across the southern plains have prepared the grasslands for optimum conditions for cattle grazing. Mexican imports were the source of many grazing operations across Texas and New Mexico and some of those ranches are going unstocked this year.
Few participants believe in the sustainability of the current price structure that forces almost every purchase of replacement cattle deep into the red ink. Adjustments will be difficult given the short supply of replacements in the pool. The industry will be forced to contract and contraction will be painful to many if not all operators in the live animal space.
The drought monitor continues to favor herd expansion. April/May rains have been generous across the plains. The recent rains have covered a broad swath of 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 steers and heifers mostly steady. Lesser kind or conditions playing a role to any hints of a lower market. Demand moderate to good. Steer and heifer calves 2.00-5.00 lower. Many un-weaned or short weaned calves included and with high heat and humidity demand is limited for these. Supply is mostly average and not as attractive as last week. Heavy rains continued to fall across
much of the state over the weekend. Wheat harvest is off to a very slow start. Supply included: 100% Feeder Cattle (50% Steers, 47% Heifers, 2% Bulls, 0% Dairy Heifers). Feeder cattle supply over 600 lbs was 67%
Compared to last week: Steer calves 1.00-5.00 higher. Heifer calves steady to 3.00 higher. Demand good. Quality average. Cattle futures remain volatile being dollars lower today after big gains yesterday. Hot and dry conditions are forecasted across the area, this should give farmers a good window to get back in the field. Supply included: 100% Feeder Cattle (47% Steers, 43% Heifers, 9% Bulls). Feeder cattle supply over 600 lbs was 41%
Feeder Cattle Futures. Feeder futures were closed.
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. Wheat has jumped making price less favorable for feeding. Favorable growing conditions are reported in most all areas. Expect summer heat and moisture pockets to begin to influence prices moving through the summer. Corn basis levels in Guymon, Oklahoma are at $.90 — basis the July contract.
Wheat has a place in feedlot rations across the southern plains. There is little information on how prominently wheat is being fed but each feedlot that has made the switch relieves price pressures on old crop corn.
THE CHANGING BEEF PLANT LANDSCAPE
It is no secret the nation’s beef plants are losing money and by some accounts — big time. Both slaughter volumes and plant operating hours have been trimmed back. The future impact, judged by the discounted futures market, forecasts there will be plant closings. No one knows what plant, but many assume it will be the independents instead of the big four who are cushioned by diversity in other meats that remain profitable.
Plant closings will provide some relief to all continuing plants, as overall capacities are reduced, thereby reducing competition for fed cattle. It also will allow the remaining plants to operate more efficiently because they can increase slaughter volumes, reducing fixed cost applied to each animal slaughtered.
A major obstacle to beef plant profitability has been the threat of ICE raids on their plants. The rumor mill has repeatedly speculated on anticipated raids and the implications of dark plants caused by labor shortages. Cattle futures prices have been pushed down as those rumors circulate. President Trump has exercised typical ambivalence on the issue and first reassured ag producers by reversing policy and giving hard working illegal immigrants a free pass if they have no criminal record then changing course and authorizing ICE raids on farm workers. The issue is yet to be resolved as ag Secretary Rollins faces off with staffer Stephen Miller, a hawk on immigration.
Packers were able to help their margins this past week when fed prices stabilized and boxed beef rose. Gains in the box prices have yet to reach the grocery store but consumers will be noticing increases as we move further into the summer. Dealing with the negative margins in the beef plants will soon be joined by threats to the feeding margins.
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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