CAB Market Insider
By Paul Dykstra
The cattle harvest schedule, disrupted by the Christmas holiday, proved to yield a very small total for the week with an estimated 508,000 head, down 5.6 percent on the same week a year ago. This suggests packers will need to fill their inventory due to this week’s shortened slaughter from the New Year holiday.
Further evidence of spot market, fed cattle demand came through in a sharp uptick in fed cattle values. The last week of December’s fed steer price average of $172.24 per hundredweight (cwt) was $2.98 per cwt higher than the week prior.
End of year sees brief,
bullish market
The last week of the year often culminates in a brief, bullish fed cattle market, and last week’s action adds confirmation to the trend.
Live cattle futures as of Jan. 2 were also much higher, as February becomes the front month on the CME board. The February contract was higher by more than $3.25 per cwt by mid-afternoon, with April more than two dollars per cwt higher.
Given the recent depression in spot market fed cattle prices, it appears to many market observers a short-term bottom has been marked after a seven-week spiral, dropping spot market values $16 per cwt.
Carcass cutout values were mixed in the report from the last week of December, in what could be summarized as a sideways market.
Certified Angus Beef (CAB) tenderloin prices are rapidly retreating from their lofty record-highs with last week’s $17.40 per pound wholesale price down seven percent from the high in late November. Ribeye prices were also a bit lower but have only adjusted two percent from their December highs.
Many of the end meat cuts pulled to dramatically lower prices in December, as is the seasonal tendency.
The last week of December’s summary showed price stabilizing or slightly higher with the expectation for modestly firmer values in January.
Consumer demand following the holidays tends to favor roasts as winter weather develops, just as holiday spending hits home for many households with additional buildup of consumer credit card debt.
Carcass quality set
to climb seasonally
With the arrival of the new year, the beef market will rapidly adjust to changes in consumer buying habits. This will remove demand pressure from ribs and tenderloins, realigning the contribution of these most valuable beef cuts to a smaller percentage of carcass value.
This expected shift seasonally tends to combine with rising carcass quality grade trends through March, narrowing price spreads between U.S. Department of Agriculture (USDA) quality grades and CAB branded product.
In the past five years, the Choice/Select spread has peaked at an average of $22 per cwt in early November, remaining in a range between $20 and $25 per cwt through the first week in December.
This November to December timeline has defined the annual widest Choice/Select spread in the average five-year data, although brief departures to even wider spreads can be noted in other months in given years.
The largest CAB cutout premium over USDA Choice followed a similar fourth quarter high in 2022 but has been more common in the low supply and high demand period of early June in other recent years.
The first quarter of 2024 promises to deliver higher average carcass quality grades, particularly as carcass weights remain record-large. The latest confirmed data places steer carcasses at 941 pounds for the week of Dec. 11, the record so far.
The slowed pace of slaughter has yet to show any sustained increases as well. Unless this changes, front-end cattle supplies will continue to be elevated along with average days on feed.
These factors should couple with the typical seasonal pattern in the first quarter to track carcass quality to their highest annual levels by March.
In March of 2023, CAB carcass certification topped out at 41 percent of eligible cattle, very near the record of 41.5 percent set in the same month of 2021. While CAB won’t predict another record-high this year, the above trends are, so far, aligned to position the share of quality carcasses near the top of the historical range by the end of Quarter One.
Paul Dykstra is the director of supply management and analysis at CAB. He can be reached at pdykstra@certifiedangusbeef.com.
