CAB Market Update
The fed cattle market moved to higher values again during the third week of August with a $1.55 per hundredweight (cwt) increase in the six-state fed steer price.
Negotiated cash trade volume was active in the North, with Iowa and Nebraska prices averaging $245 per cwt live and $386 per cwt dressed. Limited Kansas and Texas negotiated head counts sold for $239 to $240 per cwt.
Prices may relax moving into September
On Aug. 25, the U.S. Department of Agriculture (USDA) adjusted the prior week’s estimated weekly cattle harvested up from 547,000 head to 551,000 head. This was 15,000 head larger than the prior week’s abysmal 530,000 head and the largest harvest volume since the second week in July. Still, it is 58,000 head smaller than the same week last year.
Steer carcass weights remain heavier than a year ago by 14 pounds per head and 38 pounds heavier than the same week in 2023.
The annual weight increase has narrowed in the third quarter, averaging 18 pounds heavier than last year. This compares to the first quarter jump of 30 pounds per head and the second quarter average of 21 pounds per head.
Weights are expected to increase into the fall, but the pace of the increase from the summer low – 931 pounds – is slower than it has been in the past two years.
Cutout values have been increasing at blistering speed over the past two weeks. Given roughly 20 percent of boxed beef is typically available on the weekly spot market trade, buyers have had to compete for very small volume with fed cattle harvest 10 percent below a year ago in recent weeks.
Cutout values have now surpassed their late-June highs following the July slump which took prices down six percent.
Since recovering from the summer low, the comprehensive price is now the second highest in history, only surpassed by the May 2020 COVID-19 spike.
With retailers through their last-minute Labor Day buying, there is a strong likelihood prices may relax, as is their tendency moving into September. Demand tends to wane after the holiday, prior to normal fourth quarter increases.
Holding on for the ride
The comprehensive cutout value, including all grades and delivery periods for fed steer and heifer beef cuts, has rapidly escalated from the late-July summer low of $364.54 per cwt to the Aug. 26 $393.98 per cwt quote.
This eight percent increase is not much larger than the typical seasonal price hike for the same period, averaging 6.5 percent in the previous five years.
While August boxed beef inflation is more normal than one might think, it is capturing attention this year given the slightly sharper incline and the resulting comprehensive price which is now 25.6 percent higher than this time last year.
The magnitude of this year-over-year price advance is a difficult reality for retail and foodservice sectors to digest. Even so, it’s a smaller percentage increase than that of the 2013-14 period when the comprehensive price jumped 29.6 percent in the same August-to-August annual comparison.
Restricted cattle harvest as a result of weather-driven cow herd reductions was also the culprit in the 2013-14 beef market run-up. Tracing the fed cattle price reaction for these periods provides yet another interesting comparison.
From August 2013 to August 2014 the fed steer price increased 24 percent while the current 12-month price adjustment has, so far, brought on a 33 percent increase in fed steer value.
Continuing the theme, evaluating similar market dynamics roughly a decade apart, shows dramatic differences in carcass quality price spreads.
Starting at the top of the quality grades with the smallest spread difference, the latest price spread between USDA Prime and Choice is just 13 percent larger than in August 2014. This is logical given Prime carcass volume and share of fed beef supplies has more than doubled in this period.
Next, the Certified Angus Beef (CAB) cutout premium over USDA Choice, currently $22.25 per cwt, is more than triple that of the August 2014 market.
Finally, the Choice/Select price spread in the third week of August averaged $23.39 per cwt, just over twice the magnitude of that in August 2014.
Bear in mind these wholesale boxed beef prices are 60 percent higher today than they were at the time, tempering the impact of today’s price spreads by comparison.
With fed cattle supplies projected to tighten even further into 2026, the beef industry isn’t equipped to mark any peak on the price charts for this phase of the supply cycle.
What does appear evident, despite total beef market fluctuations is, consumer demand for marbling-rich carcasses meeting consumer expectations are generating substantially larger premiums and gross dollars, compared to the average, than they were under similar market circumstances in 2014.
Paul Dykstra is the director of supply management and analysis at CAB. He can be reached at pdykstra@certifiedangusbeef.com.
