June 6, 2025
THE MARKETS
Futures prices hit new life of contract highs today while cash markets seemed to be in a runaway. Each day has topped the previous in higher cash prices across the plains. Cattle first traded in Texas at $225 then progressed daily to $228 then $230 and finally yesterday $232. In the north that had been quiet until yesterday, trade action occurred at $240 live and $380 dressed. These prices were $7-10 higher than last week.
This past week’s slaughter is one of the smallest Memorial Day week slaughter on record, if not the smallest. Packers faced with declining supplies of fed cattle pulled down the slaughter number to 477,000 — 93,000 under last week and down 62,000 from last year’s holiday week. There is a widespread feeling within the industry and futures traders that the most recent surge in cattle prices is not sustainable. These price increases in live cattle will not immediately be felt in the grocery store or restaurant menus but as pricing decisions occur in the next few weeks, more definition regarding the impact to consumer spending will be tested.
CATTLE FUTURES. Futures are having a difficult time of keeping up with the rise in cash prices. For futures to rise $2 when cash jumps $5, the discount increases by $3. The battle between the reality that exists in the cash markets and the doubt expressed in the futures market is not over. Futures prices currently are selling $10 under sales this week. The front end of contracts gained $4.50 Thursday.
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 917# up 4# from prior week and 25# 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 .1 with the previous week at 85%. 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 were mixed as retailers fail to push beef purchases despite limited supplies. The abundance of choice product from high grading animals has narrowed the choice/select spread.
Replacement markets
Seasoned veterans noted a change in the appetite for calves for grazing in the auction barns across the country. Interest was turning to heifers and cows and breed heifers due to simple economics. The prospect for selling a $2000 calf presents a brighter economic return than buying that $2000 calf hoping for a yearling price above $300. The decisions made by operators and communicated to buying agents across the country will jump start rebuilding.
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 two weeks ago: Feeder steers 5.00-10.00 higher. Steers weighing 600-700lbs traded steady to 3.00 lower. It appears that many grass buyers have pulled out of the market, contributing to the softer demand in this weight class. Steer calves 2.00-6.00 higher. Feeder heifers 3.00-7.00 higher. Heifer calves steady to 1.00 higher. Quality plain early but improved to average with a few fancy drafts. Several
northern buyers were present today helping demand for steer cattle. Cattle futures traded dollars higher today. Rain and storms are forecasted for Tuesday night and Wednesday morning. Supply included: 100% Feeder Cattle (56% Steers, 41% Heifers, 3% Bulls). Feeder cattle supply over 600 lbs was 76%
Compared to last week: Steer calves steady to 5.00 lower. Heifer calves steady to 3.00 lower. Demand moderate to good. Quality average. Storms are forecasted for this evening. Supply included: 100% Feeder Cattle (37% Steers, 53% Heifers, 10% Bulls). Feeder cattle supply over 600 lbs was 17%
Feeder Cattle Futures. Feeder futures were higher following cash and auction reports.
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. Grain prices moved marginally higher. The graph of differentials between contract months in corn futures has undergone a adjustment that now has old crop prices flatlined with new crop. Planting is nearing completion and traders expect 4 million new acres over last year. 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.
PRICE REPORTING FROM THE NORTH AND SOUTH REGIONS
Last week the top price paid in the south was $223 compared to the top price paid in the north of $237. One or two pens may have sold higher in either region, but $14 would not be possible if USDA’s Mandatory Price Reporting were to properly do their job. The average quality grade in the most recent report showed Kansas at 73% compared to Nebraska/Iowa of 74% choice with Texas falling behind at 67%. The choice/select spread close last week between $9 and $10 cwt.. Common sense would tell you all the Nebraska plants would source cattle in Kansas with this spread.
This variance cannot be explained with quality grade differences, nor can it be explained by the boxed beef selling prices in north and south regions. Both have plants located in the central plains and can easily ship to either coast where population centers exist. It can be explained by a flaw that USDA refuses to correct.
The lion’s share of formula and grid sales exist in Texas and Kansas. Those prices start with a base price determined from Mandatory Price Reporting. Packers can keep the base price low by buying many of the purchases in the South with “Over the Top” prices. Mandatory Price Reporting groups these sales into formula sales where they can’t be separated for base price purposes. This leaves only the lower quality pens in the south to trade in the live cash markets.
USDA produces a Monday morning recap of the previous week’s prices each week. All pricing is required to be entered by packers by 9 am Monday morning and the report is issued midday Monday. Even though the “over the top” prices are known and reported Monday morning, USDA refuses to put them in a separate bucket thereby facilitating favorable base pricing for the packers on all the cattle in the south. The law authorizing MPR seeks price transparency as the goal and USDA’s refusal to separate these transactions ignores this directive.
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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