The start of a new year often brings promise of better times and stronger markets. This year will be no exception, even though 2023 was a terrific year for the prices of all classes of cattle. Barring an unforeseen disaster that might disrupt domestic and global beef markets, the year is set for possibly higher cattle prices again because cattle numbers will continue to shrink this year.
The caveat to such prices, as always, is beef demand. Demand held up well last year in the face of sharply higher wholesale beef prices and high retail prices until October. The industry will be hoping that American consumers will continue to recognize beef as the premier protein and will continue to buy lots of it even if prices are much higher than those of pork and chicken. The other hope is that exports rebound from their year-on-year decline in 2023 versus 2002. This will largely depend on stronger economies in the key Asian markets of South Korea and Japan.
Cash live cattle prices ended the year on a welcome uptrend, which cattle feeders hope will continue in January. Prices advanced the week before last and again last week despite packers buying for two holiday-shortened weeks. Prices from the last week of October had declined $17.98/cwt live from $186.15/cwt live in eight weeks. But they increased by $1.80/cwt the week before last to average $170.51/cwt live and looked set to advance again last week. Dressed price meanwhile arrested their seven-week decline to average $270.38/cwt, up $2.95/cwt from the prior week. The price advance before Christmas came despite only 43,919 head reported sold by USDA on the cash market.
In contrast, boxed beef cutout values continued to struggle to gain any traction. The comprehensive cutout (cuts, grinds and trim) the week ended Dec. 22 averaged $282.44/cwt, up 8 cents from the prior week. The Choice cutout averaged $284.11/cwt, down 11 cents. The prices of fatty (50CL) and lean (90CL) trimmings both declined sharply during the week. The 50CL price averaged $49.72/cwt. It was down $4.14/cwt from the prior week, and it was the first time it fell below $50/cwt all year. It was also down 48.6% on the same week a year earlier. The 90CL price averaged $243.81/cwt, down $5.83/cwt from the prior week and down 1.3% from the same week last year. The week saw spot market sales represent 28% of the total volume, with formula sales at 51.4%, forward sales at 20.1% and export sales at 11.5%.
Beef buyers last week appeared in no mood to either order a lot of beef or pay higher prices despite the holiday-shortened week and the same for this past week. One reason for the slow sales, as in past weeks, was that prices remain well above year-ago levels. The comprehensive cutout the week before last was up 8.9% on the same week a week earlier, while the Choice cutout was up 9.5%.
The biggest barrier to higher live cattle prices in the first half of 2024 is the near-record large front-end supply of cattle. The ongoing weakness in feedlot marketings amid still large placements means the Dec. 1 Cattle on Feed (COF) report total was close to a record for the date. It also meant that front-end cattle supplies continue to increase and remain a risk to first quarter live cattle prices.
Front-end fed cattle supplies (COF 150-plus days) continued to build into the new year, says Andrew Gottschalk, HedgersEdge.com. The record-high level trumps the previous January record established during the COVID-19 year of 2021 by 305,000 head. The record-high level is a factor that will provide a challenge to first quarter price histories. Since 2010, in only one year (2015) did first quarter prices fail to average above the respective prior fourth quarter price average. Will record-high supplies allow this year to add to the string of years that first quarter prices averaged above the prior fourth quarter? Weather may prove to be the kingmaker to determine this outcome, he says.
The buildup in supplies, which is ongoing, is the direct result of reduced marketings, not larger placements as others may have indicated, says Gottschalk. Marketings in the last three quarters of 2023 declined 751,000 head more than placements, leading to the record-high front-end cattle supply. Marketing levels need to increase to limit the carryover into the second quarter of the new year, he says. That will depend a lot on demand, from packers and consumers. — Steve Kay, WLJ columnist
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
