CAB Market Insider
During the week beginning Oct. 16, fed cattle slaughter saw a bit of recovery with a 638,000 head weekly total.
Singling out the fed cattle slaughter shows the Oct. 20 total was reduced just 8,000 head, compared to the average daily total in the four prior business days, which averaged 98,750 head each.
In the previous week, negotiated fed cattle traded in a range between $185 to $186 per hundredweight (cwt) last week in a market that denoted a much firmer tone than it had for many weeks.
This price level was the highest since early August in a market which has been tightly rangebound for multiple weeks.
The Oct. 1 Cattle on Feed report, published on Oct. 20, is the most impactful short-term market factor at this time.
Feedlot placements for September were unexpectedly 106 percent of placements a year ago, contrasted against varied analyst pre-report estimates for placements just over 100 percent.
December live cattle futures, which closed Oct. 20 at $184.60 per cwt, ended the Oct. 23 session at $178.35 per cwt, a $6.25 per cwt decrease. In a volatile, short-term scenario, live cattle contracts began to recover some of the lost ground by Oct. 21.
Beef markets look
positive, cutout values
turn the corner
Meanwhile, current cattle and beef market fundamentals are positive.
Packer demand for cattle was sharp during the week of Oct. 20, with the two dollar per cwt price increase on a significant volume of negotiated cattle.
Total U.S. Department of Agriculture (USDA) Choice carcass production is eight percent lower than a year ago in the latest weekly report, driven lower by a one percentage point decline in the Choice grade.
Also, cutout values have turned the corner with higher weekly average values across the board with Certified Angus Beef (CAB) up $3.97 per cwt, Choice up $4.15 per cwt and Select $1.32 per cwt higher.
As mentioned two months ago, the dip in total USDA Choice boxed beef tonnage was destined to hit the fourth quarter market with widening Choice/Select price spreads. This is evident in our latest data with the Choice cutout $25.79 per cwt premium to Select.
The CAB/Choice price spread is more stable at $20.44 per cwt, which is historically wide but perfectly aligned with October price spread values since 2020.
CAB brand sales third best in 45-year history
Shifting market dynamics have already marked trend changes in the 2023 cattle and beef markets. These shifts are most succinctly summarized through two factors – fewer cattle and higher prices – which will further entrench themselves in near-term trends.
As CAB celebrated the close of its 45th year this September, several highlights emboldened brand stakeholders and producers.
The single largest factor in the brand’s supply – fed cattle slaughter volume – provided a formidable obstacle as the nation’s drought-reduced cow herd pulled fed cattle supplies 3.3 percent lower for the past 12 months.
However, with other positive trends, CAB acceptance increased 0.5 percent for the fiscal year with 5.82 million head earning the CAB brand.
Marbling trends have been on a lower pattern in the past year with USDA Choice slightly lower for the period. However, the Premium Choice carcass share has been surprisingly strong.
This, coupled with the Prime grade working both above and below the 2022 pattern, allowed the CAB carcass acceptance rate to improve half of a percentage point to 36 percent in Fiscal Year 2023.
Cattlemen continue to include Angus genetics in their breeding programs to a greater degree, boosting brand-eligible cattle to more than 72 percent of total fed cattle supplies.
This includes enrichment from the heavily Angus-influenced beef on dairy population. There were 16 million Angus-type carcasses processed at licensed packers in the fiscal year, roughly 72 percent of the fed steer and heifer supply.
CAB brand sales battled the headwind of smaller steer and heifer slaughter to end the year just 0.5 percent lower than in the 2022 fiscal year. This culminated in the third-largest sales volume year and the eighth year of brand sales surpassing one billion pounds.
While retail grocery store sales were understandably 4.9 percent lower on the year, there were several notable highlights on the positive side of the ledger.
International brand sales were up six percent with largest gains in China, Hong Kong, South Korea and Mexico, even though total U.S. beef exports charted a negative trend.
Record-large CAB Prime sales featured a 17.7 percent increase, while value-added products were up 9.8 percent. Both categories surpassed 40 million pounds of CAB sales volume.
Fourth quarter trends are currently widening quality carcass price spreads with the Choice/Select spread at $25.79 per cwt and the CAB/Choice spread at $20.44 per cwt.
Short-term packer demand for quality cattle to fulfill demand for traditional CAB and CAB Prime carcasses should result in continued expanded grid premiums through early December.
Although surprisingly larger feedlot placement head counts were reported for September, continued high-quality carcass supply challenges will remain a theme in the brand’s 46th year, already underway.
This recommends cattlemen in each sector maintain focus on carcass demand factors and the margin opportunity which exists for cattle to meet modern consumer expectations.
Paul Dykstra is the director of supply management and analysis at CAB. He can be reached at pdykstra@certifiedangusbeef.com.
