October 28, 2026
MARKETS
Some crazy trading occurred today on both the futures and cash markets. Futures prices crashed with little explanation and some cash prices followed but information was sketchy and incomplete. Light live trade in the north at $225 was lower but dressed sales from $350-365 was difficult to compare. The price range on dressed sales was confusing. Packers, short bought, needed additional cattle for this week and were pleased with the pricing cattle owners were willing to accept.
Trading will likely be late week with cattle owners with close outs deep in the fed fighting to improve cash prices and processors struggling to hold on to current margins. Show lists were modestly larger in all regions but packer inventories beginning the week were also extremely short. Improving box prices have surprised some especially when much of beef’s gains have come at the expense of pork. Pork prices have declined $20 cwt..
A concern developing for cattle owners with hedged positions is the basis. The record breaking low placement numbers might contribute to a premium structure in the live cattle futures markets. Trying to guess the best time to cover hedges is always difficult but is increasingly tricky to pick the right week, day, or time of day. The late week spot cash trade also leaves much uncertainty about the cash trade.
This week slaughter volumes was 546,000 head — 7,000 under the previous week and only 27,000 under last year. The weekly slaughter continues to reflect improving plant utilitization which translates into better margins for the processors. Improved plant utilitzation means a more efficient beef pipeline. Cow slaughter continues to increase weekly but remains well under prior year. Processors have maintained profitability since July — the longest period during the past few years.
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 958#, up 5# from the prior week, and 12# 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 .2% from the previous week at 87.4. The quality grade remains near historic highs as cattle are fed to heavier weights.
The Weekly Steer and Heifer Grading Report reflects regional supplies of choice and prime cattle and often is determinative of regional differences in live prices. The report also indicates the current status of fed cattle offerings in each area.
Forward Cattle Contracts: Forward contracts are always a portion of the inventories the processors maintain for slaughter. Offered 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 movement of futures prices, either up or down, will relate to the number of forward contracts.
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.
Fluctuating commodity prices have always presented a problem for restauranteurs. No restaurant wants to continually re-price items on the menu. Consumers are attentive to price increases and quickly notice upward pricing. Welcome to the world of a workaround. Some restaurants have opted to post a notice in small print at the bottom of a menu informing diners of a special surcharge of xx% added to the bill because of high fuel and labor costs.
The Cutout. The lean beef prices have struggled to hold ground under pressure from the imported beef. Cow slaughter is increasing seasonally. This past week’s slaughter volume helped improve plant untilization and efficiency. Slaughter volumes will continue to be dictated by processing margins and government intervention.
It is important to remember that spot box prices are much like spot cash prices for live cattle. Most boxes are sold under formulas and do not always have the same fluctuations as the spot market.
Replacement markets
October and November are the largest marketing periods of the year for replacement cattle, but this year they are not so large. Generous rainfall and mild temperatures have allow many operations to hold cattle late on pasture. Also the incentive to raise one more calf from an aging cow is always a temptation. Winter grazing is abundant and the problem, simply stated, is a shortage of animals to fill those fields of grazing opportunities.
Economics is another threat to winter grazing. Those buyers closely examining the future outcome of today’s purchases, based on deferred cattle futures, will not find financial rewards at the end of the line. Much of the nation’s farm tracts will be left empty of cattle reserving the crop to be harvested for grain.
Short supplies of replacement cattle is also moving the needle on marketing strategies. Many stocker operators are transitioning into larger weights on pasture. This has triggered sharp increases the purchase of cattle weighing between 550-650# for outside grazing. The purchase of small volumes of 400# cattle is difficult and costly and sometimes risky from a health standpoint.
Feedlots are in the early stages or rightsizing occupancy levels. Most feedlots have been operating at reduced capacity and many smaller feedyards are empty but right sizing will require closing some facilities. The process has started and will continue through next year. The nation’s largest feedyards are dominated by operating entities owned by Wall Street investment firms and those firms aren’t friendly to capital infusions or negative returns.
Seasonally health problems can occur anytime with the stress of weaning. The fall is the most stressful season for unweaned calves and many operators cringe when healthy calves on arrival turn sick. The penalty suffered on freshly weaned calves is often an usually large death loss. Not only can death loss percentages jump, but also sick calves present a constant labor requirement and long term performance impairment. A $50 cwt. spread between weaned and unweaned calves is large, but sometimes justified. The spreads between weaned and unweaned calves is widening. Knowing more about the background of new purchases can be helpful including full health records.
The Drought Monitor is a map showing regions of the country under stress for lack of normal rainfall. The map is compiled over a week and updated every Thursday with data collected through Tuesday of that week.
Compared to last week: Feeder steers 5.00-15.00 higher, 600-700 lbs 20.00-30.00 higher. Feeder heifers 2.00-10.00 higher. Steer and heifer calves 15.00-30.00 higher. Demand very good for all classes. Quality improved from last week. Again, little to no discounts for un-weaned calves; if they are of quality. Supply included: 100% Feeder Cattle (54% Steers, 38% Heifers, 8% Bulls). Feeder cattle supply over 600 lbs was 49%
Compared to last week: Steer calves over 500lbs unevenly steady, under 500lbs 10.00-15.00 higher. Heifer calves over 500lbs unevenly steady, under 500lbs 20.00-30.00 higher. Quality plain to attractive. Quality played a significant role in buyer participation, with buyers remaining highly selective throughout the sale. Overall quality improved as the sell progressed. Estimated receipts for tomorrow’s feeder sale is 4000. Supply included: 100% Feeder Cattle (48% Steers, 44% Heifers, 8% Bulls). Feeder cattle supply over 600 lbs was 25%
Feeder Cattle Cash Index. The index is tracking the moves in cash prices. The Cattle Report has updated index reporting to provide a daily graph showing changes in price of the index.
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 seem to have found support as the crop enters the wind down phase. The current basis level is near +$1.00 in Guymon, Oklahoma — basis the December contract.
LIVE SECTOR SHOWING SIGNS OF STRESS
Owners of cattle in the live sector of the beef supply chain have enjoyed profitable times for much of the past three years with few interruptions. During that period, price downturns and bad news events were quickly overcome and profitability continued. This year began with positive margins but those soon turned negative. New problems and obstacles to profitability proved obstinate with no quick remedies. Beef prices were targeted as a proxy for inflation and affordability. The losses of recent months have created stress signals not seen in a long time in the industry.
The primary stressor is over capacity in the feeding sector. Cattle owners watched as over capacity in the processing sector created hundreds of millions of dollars of losses. It took those continuing losses to drive plant closings and right sizing slaughter capacity to restore profitability. Those same forces now are at work in the cattle feeding sector.
The largest cattle feeding operations are primarily owned by investment funds looking for small, reliable returns on their investment. The model was a leveraged fully protected feeding venture offsetting feeder cattle purchases with short live cattle contracts and long corn futures. Overcapacity and empty pens has left too many empty pens competing for too few replacement cattle. The fully protected and hedged program today locks in a $200+/head loss.
The second tier feeding companies are the custom feeders soliciting customers to take the risk feeding cattle to finish. Customers are choosing to sell rather than feed – leaving the custom feeding firms with the bad choice of buying a loser or leaving pens empty. Many operations are struggling with hesitant lenders unwilling to shore up financial stress with risky loans.
The solution like the processing sector will be feedyard closings. Lowering occupancy rates will not solve the problem because a half full feedyard must mark up feed cost to replace lost feeding efficiencies similar to the beef plant operating at 50% of plant capacities. It is well known that several feeding operations are on the market for sale. Unfortunately, it is not a good time to buy.
CARDINAL RULE FOR COMMODITY TRADING
“IF IT IS OBVIOUS, IT HAS GOT TO BE WRONG!”
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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