January 15, 2026
MARKETS
Obviously heavier placement weights mean less days on feed, but except for dairy cross placements, yearlings placed into feedyards are getting heavier similar to fed out weights. No one wants to replace inventory with high priced replacements. Some of the heavy placements of recent time frames are reaching marketing weights as fed cattle and the breakevens are at nose bleed levels. The next few months will market some high priced feeder cattle and the outgoing price levels will be important.
There have been no sales this week in any area and packer interest will improve today. Smaller show lists in all areas, combined with rising box prices, raised expectations for fed prices this week. Processing margins seem stressed and packers will continue to avoid activity in the cash markets that influence the base price for the lions share of weekly trade. USDA allowance of “over the top” trades to not be included in cash prices plays into their hands.
Retail buyers of beef were faced with a puzzling price structure on Tuesday. The Choice grade of beef, comprising almost three quarters of all domestic fed beef, was selling for a dollar discount to the inferior Select grade of beef. If a retailer chose to market the lower grade they would need to pay a higher price. Seasonally it is not unusual for the spread to narrow but rarely does the Select price move above Choice.
This past week’s slaughter of 553,000 head was up 79,000 from the previous New Year’s slaughter volume, but 38,000 under last year. The week also held on to the decline in the spread between choice and select grade now at $3. Grading of cattle above the choice grade topped all time records. The slaughter is likely to remain low for the coming weeks as packers adjust to a plant closing and new adjusted slaughter rates in the remaining plants.
Futures prices fell following two postive days to start the week. Fed supplies are remaining short and slaughter levels seem in balance with beef demand.
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#, 2# higher than the prior week, and 35# 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 .4% from the previous week at 86.9%.
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 volatility in futures prices has caused more interest from cattle owners in forward contracting. During the past two to three years, fewer cattle have been forward sold as most producers anticipate higher prices in the future months. Some owners now are willing to set the price for future deliveries with basis levels to the futures varying by region. Large discounts in the deferred month usually discourages forward contracting.
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.
If beef demand should improve heading towards Christmas, the middle meats should provide support for the cutout. USDA Prime cuts are carving out a larger slice of the grocery offerings. Holidays provide an opportunity for many families to spurge on food purchases. 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 are modestly higher. Slaughter levels in the mid 550s are finding support at the retail level. The choice/select spread remains narrow. Because of improved quality grade, more prime cuts will be on the shelf this year. Daily beef reports should include spreads between choice and prime as prime volumes are on a par with select for volume of sales.
One casualty of the beef marketing efforts has been the highest end products. The Wagu and branded “all natural” specialty items often seen on the meat counter, but always carrying a heafty price tag. These include the USDA Prime cuts and have become more prevalent as quality grade on all cattle continues to break new records. It is not unusual to see packages carrying a discount sticker. They must be sold like all perishables, but unlike most perishables, the consumer experience eating the discounted cuts is not diminished.
Replacement markets
The feeder market is reopening and many feedlots are searching for available cattle but finding few and those offered are in strong hands and considered overpriced. Supply shortages have created intense competition for a small supply of cattle and all buyers are wary. Placement numbers are falling in some cases rapidly. Hopes for a positive outcome of ownership of new purchases are not high and most operations want to stay in the market but know they are overpaying for cattle. There is a new desperation driving new purchases of owning inventory at any price.
Occupancy levels are falling in all regions but especially in Texas. The whispers are getting louder about a port by port opening of the Mexican border to be announced soon. Certainly feeder futures have posted innumerable losses occasioned by the border opening rumors and once the reality is experienced, very little market impact will be noted. Many structural changes are occurring in Mexico as more ranchers opt to feed their own cattle in Mexico.
Empty pens are common spreading from south to north. Some operators would prefer to look at an empty pen to taking on the exposure by a new purchase of high priced cattle. Some bankers would agree. Those who do choose to place cattle on feed, must gamble with hard earned equity that future prices will rise well beyond the heavily discounted price witnessed on the futures board. Some consolidation of feeding capacity is expected in this new year.
The drought monitor continues to favor herd expansion. Some dryness has developed in the southern plains. 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 mostly steady to 2.00 lower. Feeder heifers steady to 4.00 higher. Steer calves 8.00-12.00 higher. Heifer calves mostly steady. Several fancy type cattle included and these up to 15.00 higher conservatively. Some of these fancier cattle seem like priceless artifacts, and buyers were very eager to have them. Demand is very good for all classes after a slow start. Quality improved throughout the day, and average to many attractive. Several large groups of lighter weight cattle were available. Rains moved across parts of the state late last week, but it was a quick system, and if you were lucky, you might have gotten an inch. Most received less than half an inch. Much of the state still has a big need for rain. Supply included: 100% Feeder Cattle (60% Steers, 38% Heifers, 2% Bulls).
Feeder cattle supply over 600 lbs was 62%
Compared to last week: Steer and Heifer Calves were 5.00 to 10.00 higher with a good to attractive quality and a high demand. Supply included: 100% Feeder Cattle (45% Steers, 50% Heifers, 5% Bulls). Feeder cattle supply over 600 lbs was 27%
Feeder Cattle Futures. Futures prices 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. 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. Corn prices moved sideways. The USDA stocks report raised ending stocks to 2.2 billion bushels from estimates of 1.9 billion bushels. USDA also add 1.3 million acres to the harvested acres for this year. The report was very bearish for corn prices. Corn basis levels in Guymon, Oklahoma are at +$.50 — basis the March contract.
PUSHING THE LIMITS ON CATTLE OUT WEIGHTS
The swap rate is poor. Each new purchase ratchets up the breakeven to dollars above deferred futures prices. Most feedyards are full of inventory that marked to market would deliver a loss. This climate encourages cattle owners and feedlot operators to add more pounds to the cattle on hand.
Some bad things happen when cattle are pushed to excessive weights. For almost all cattle, feed efficiency declines. Those extra pounds of gain require more incremental pounds of feed and the cost of the additional pound, rises. The second occurrence is that most cattle reach a maturity point for the genetic potential of that individual animal. Above the optimum weight for each individual animal, the extra weight gain is deposited on the carcass as fat instead of muscle. Additionally, some plants simply can’t handle a carcass over a certain weight. This last point is often exaggerated and used as a bargaining tool in price negotiations.
The majority of livestock sales are formula or grid sales. Except for flat grid sales, those animals earning a price based on carcass performance penalize animals in the YG 4&5 categories. Those penalties can often overcome any benefit from better quality grade. This is especially true during the first quarter of the year when choice/select spreads are the narrowest and it is certainly true now.
Any trend graph will show the rise in carcass weights over the decades and more dramatically over the past few years. We may have reached the weight tolerance levels for many but not all cattle. While genetics will continue to improve it is reasonable to believe the rate of increase in marketing weights will slow.
Marketing plans for the larger beef cuts have undergone a change and retailers are now kicking back on the size of the primal cuts. Many cuts are problematic for optimum portion control to fit consumer needs at the meat counter. Adjustments have been made but evidence is surfacing that additional increases will not find acceptance in the marketplace. Expect to see more innovation in portion control on the meat counter as retailers test drive new cuts.
USDA CONTACT FOR CORRECTING MANDATORY PRICE REPORTING
mpr.lpgmn@usda.gov
This email address is used for comments for Livestock Mandatory Price Reporting (LMPR). You can also leave a voicemail at 202-720-1990 if needed.
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.
Contact Us
The CATTLE REPORT will strive to answer all emails. Our editorial views are not always popular and sometime create controversy and are sometimes flat out wrong.