August 7, 2025
THE MARKETS
Hot and hotter. This characterizes both the markets and the climate. This week the humans and cattle will suffer through 100+ degrees in much of the country. The cattle futures this past 7 days have posted gains from $228 to $239 in the spot August contract. Only a sprinkling of cattle traded at $237 in Texas this week, but most asking prices remain at $240 in the south and $250 in the north. Packers are asking sellers to price firm but many are reluctant to price during futures trading hours. They have purchased the only cattle available at $245 — steady with last week and are facing asking prices of $240 and $250 that are not firm, and some cattle owners are already raising asking prices above that level.
The processors will attempt to capitalize on the shortened supplies of product created by two weeks of sub 550,000 head slaughter. Retailers will begin to build inventories for Labor day and several days of large gains in box prices have reflected the change in leverage. The consumer has yet to face a rebalanced sticker price reflecting the input cost of live cattle. The processor has been eating this loss but smaller slaughter volumes will provide the only pathway for margin corrections at the processing level short of a plant closing. The testing ground will be at the retail counter when consumers are presented with higher prices and forced to choose between competing meats.
This past week’s slaughter at 535,000 head was 14,000 under last week and 58,000 under last year. This week’s slaughter is the smallest non-holiday slaughter week on record. Reducing the slaughter is the only pathway open to the processors short of a plant closing. For the second week in a row, small slaughter numbers will test the ability of processors to gain leverage with retailers who have avoided the margin stresses from small cattle supplies. This week will likely ratchet up box prices in the coming week. Box prices have fallen as expected following the holiday and now packers will look to stabilize prices with less product to offer.
CATTLE FUTURES. Futures shot higher for day four playing catch up to cash prices that are setting new records each week. The $11 cwt. gains since August 1 would seem to be catching up but spot asking prices also keep jumping.
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 914# up 1# from prior week and 20# 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 .7% higher from the previous week at 84.4% .
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 jumped higher as retail interest entered the market this week finding limited supplies of beef and causing sharply higher prices. Signs are the reduced slaughter is changing leverage between processors and retailers. Slaughter this past week is slightly below last week and the lowest non-holiday in a decade.
Replacement markets
Beef producers will offer many of this year’s fall calves and yearlings for sale via video auctions beginning this past week and continuing through the fall. The mid year inventory featured a smaller pool of replacement cattle and confirmed rebuilding of the nation’s cattle herd that will require heifer retention necessary to rebuild. Attention is directed towards heifers and heifer prices are especially strong during this rebuilding phase. This build up cycle will also focus many breeders on the value of genetics in herd rebuilding. Registered bull prices have followed other prices higher and prominent among the drivers for higher prices is evidence of genetic superiority.
The status of this year’s grain crop is nearing the point when adverse conditions might threaten the crop. It is always premature to call the result before the combines finish harvest but the likelihood of a record corn crop is increasingly obvious to most observers. Already USDA is calling for 5 million more corn acres and has yet to adjust upward the record yield of 181 bushels despite favorable growing conditions in most high producing areas. Corn prices have fallen from prior year and may fall below the magical $4 before harvest is concluded. Basis levels might also fall as the southern plains cashes in a large crop.
Producers are taking all cattle to larger weights both on pasture and in the feedlot. They are discovering those cattle that transition to heavier weights efficiently vs. those cattle unable to efficiently add additional weight. In the feedlot all cattle have the optimum harvest weight for quality grade and yield grade and sometimes producers miss the target both under and over the desired weight for maximum performance. Many 600# cattle, that historically were sent to the feedyard, were redirected this year to summer grass and will deliver this fall at historically heavy weights.
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 steers very uneven and mostly steady, over 800 lbs 3.00 lower. Some better quality type steers cruising past last week’s tops but lesser quality seeing some discounts. Feeder heifers steady to 3.00 lower. Steer calves steady. Heifer calves steady to 5.00 lower. Demand moderate to good. Buyers remain somewhat cautious as cattle futures can’t seem to find a direction. Quality mostly
average. Some un-weaned calves selling at the top of the price spread but these also of better quality. Cooler temperatures over the weekend with rain showers around but the mid to upper 90’s will be back this week. Supply included: 100% Feeder Cattle (65% Steers, 32% Heifers, 3% Bulls). Feeder cattle supply over 600 lbs was 71%
Compared to last week: Cattle trade was very uneven today, with quality ranging from hard-weaned, high condition calves to unweaned and plainer type offerings. Fescue grass cattle with noticeably lower quality weighed on the market today. Hard weaned cattle still topped the market, but supply was very limited to this class of cattle. Bulk of supply was either unweaned or plainer type cattle. Supply included: 100%
Feeder Cattle (36% Steers, 44% Heifers, 21% Bulls). Feeder cattle supply over 600 lbs was 24%
Feeder Cattle Futures. Feeder futures sustained three days of upward prices making large gains each day.
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. Corn prices firmed following recent declines. USDA has yet to raise the estimated crop yield already at a record level. Elevators are lowering the fall basis in anticipation of a large corn crop, but raising the current basis on the spot month. Corn basis levels in Guymon, Oklahoma are at +$1.00 — basis the September contract.
THE $1000 CLOSE OUT
Cattle owners watched beef processors clip $1000/head profits for months on end never imagining those types of returns could land on their doorstep. $1000/head profit is big money to almost anyone but when you see it happen and are slaughtering 5000 per day, it adds up fast. All plants are not 5000/day, but no matter, this size of profits are supersized.
Now comes the cattle owners’ turn. The same conditions that allow outsized profits for the processors are reversed and now too much processing capacity is chasing too few cattle. Boxed beef prices are no longer the driver, the kill slots necessary to sustain an open business are forcing purchases that are subsiding the bottom line for cattle owners.
Certainly, all close outs are not taking $1000/head to the bottom line, but the fact is some cattle, depending on when they were purchased, and at what weight and price, and subject to good performance, are returning a $1000/head profit. This favors lightweight cattle purchased on last year’s market and cattle that have enjoyed some of the cheaper grain costs that have entered into this year’s close out calculations.
The time-tested warning should be part of any advice given to those choosing to take a ride on this railroad. Any animal that can make a thousand dollars a head can lose a thousand a head. Good fortune is not forever. Some who have heeded this advice have squandered some of the recognized gains to the futures market, but the fat lady hasn’t sung on the next turn of cattle. Important to every operation is the necessity of holding sufficient equity in hand to live another day.
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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