CAB Market Update
The first week of November’s federally-inspected cattle harvest of 615,000 head was 8,000 head lower than the week prior and 21,000 head below the same week last year. Fed cattle harvest in the past three weeks has been relatively strong, averaging 496,000 head, just 1,000 head shy of the weekly total a year ago.
Carcass weights, on the other hand, continued their record-breaking ascent with steer weights making a massive 10-pound weekly increase to average their heaviest ever weight at 960 pounds apiece – 18 pounds heavier than the previous record set last December.
Heifer carcasses, last posted at 866 pounds each, are 14 pounds heavier than their fall 2015 record high.
For the week of Oct. 14, the carcass weight and head count equation places fed cattle carcass tonnage 1.7 percent larger than a year ago.
Live cattle futures prices have suffered in the past week with the December 2024 contract down more than four dollars per hundredweight (cwt) from the Oct. 29 multi-week peak at $189 per cwt.
This pullback, however, concludes an arduous climb from the August through September fallout which took the December contract down to $173 per cwt.
The more recent correction creates a strong basis in the fed cattle market with the first week of November’s cash price – a four dollars per cwt premium – to the December futures. This incentivizes feeders to pull cattle ahead in the marketing schedule.
As fourth-quarter holiday buying demand has kicked in, boxed beef cutout values have rapidly progressed in the past three weeks on seasonal strength.
The comprehensive cutout price lost $16 per cwt in value since mid-August to the end of September at $300 per cwt, but has now recovered all of this in the first week of November’s summary average price.
Seasonality takes over
The fourth quarter tends to be the period most prone to follow historical seasonal patterns for carcass cutout prices. Although annual price levels have certainly advanced to record levels, the pattern in spot market values from October through December tends to track a pattern.
The expectation of elevating prices beginning in early October was met with the Choice cutout rallying roughly $20 per cwt.
This is driven primarily on middle meat demand shifting from a much reduced year-over-year price point this summer, now elevating to match 2023 levels.
On the supply side, carcass quality grades also tend to follow a strong seasonal pattern. The percentage changes in total U.S. Department of Agriculture (USDA) Prime and Choice carcasses tend to peak in March and bottom in September through October, varying on several factors including cattle age, type and environmental factors.
The range in Choice and Prime was wide in 2023 with an 85 percent March peak and 78 percent October bottom.
This year, the same 85 percent peak was realized in March, remaining much higher than 2023 through September before slipping fractionally to 82 percent.
In the past five weeks, a more pronounced downshift kicked in with a two-percentage point drop to 80 percent Choice and Prime, with Choice giving up ground to Select.
USDA Prime grading remains resilient at the historic seasonal record of 10 percent of total fed cattle carcasses. Yet, seasonal demand for Prime middle meats has driven the Prime cutout premium over Choice to $47 per cwt, according to USDA.
The latest report shows Prime grid premiums matching a year ago at $19.80 per cwt or $184 per head at the 930-pound blended fed cattle carcass weight average.
Record carcass weights have boosted Prime carcass tonnage to a calculated 17 percent surplus over a year ago.
Even though a relatively small portion of subprimal cuts are marketed to end-users at a Prime premium, the steady premium on higher supply provides direction toward the future. This will be key for added sales volume for the Certified Angus Beef (CAB) brand Prime label and higher gross values for calves and fed cattle.
Paul Dykstra is the director of supply management and analysis at CAB. He can be reached at pdykstra@certifiedangusbeef.com.
