We hope everyone had a merry Christmas, and hopefully everyone has a grand new year. The cattle industry should have a good 2024 with cattle numbers continuing their decline. Packers have enjoyed some profits the past few weeks with lower priced fed cattle. Cow-calf guys should remain in the driver’s seat; 500-pound calves should remain in the $300 range for a while if they are long weaned.
The Cattle on Feed report gave us no surprises, the supply of slaughter-ready cattle is still growing; cattle on feed was 2.7% higher than the previous December and the lack of marketings is stacking them up, marketings were down 7.5%. And these holiday weeks have shortened slaughter levels. Packers are earning around $40 per head, which I hope is enough to speed up processing lines. The Choice beef cutout has been trading in the $290 level giving consumers a bit of a break on beef prices.
Carcass weights have been extremely high; dressed steers were 846 lbs., 16 lbs. higher than a year earlier. With high-priced replacements, feeders decided to make them bigger—1,500-lb. steers have been in high demand by packers. On an interesting note, beef production was 524 million lbs. the week ending Dec. 23, while beef production for the same week a year earlier was 457 million lbs. So those big cattle are making a difference on beef tonnage.
Placement patterns will confuse the market going forward. If cattle feeders don’t start moving some volume, we could be stacking more fed cattle into the second quarter of 2024. The good thing is demand picks up during April through June, the highest beef demand months of the year.
At mid-week it looked like the fed cattle trade was steady with $171 a week earlier. Most market analysts were looking for the market to be a bit higher this past week. Winter weather in the North may have slowed trade down a bit, creating a winter market; holiday travelers had a rough post-Christmas travel episode.
The Ag Center’s Cattle Report said, “Trade prices were slowed by the storm in the Midwest and the holidays. Show lists were mainly flat with uncertain offering numbers in the north. The largely positive basis of recent weeks has been replaced with futures prices that are spot on to cash and will not be a large incentive to move cattle early. Weather as always will dictate movements of fed cattle during the winter. Cattle owners are pricing most cattle at $175.
“Last week concluded trading for the week with $1 higher prices in the South and $2-3 higher in the North. Trading occurred across the northern Plains at $1-3 higher prices with live prices from $170-171 and dressed prices mainly at $270. In the South, trading concluded Friday at $171—$1 higher than last week. A few outside sales in all regions reached $172 live. The next two weeks will feature smaller slaughter volumes due to holiday schedules.
“The high volatility witnessed in the futures market is unlikely to subside with the new year. Two distinct camps have directly opposed views of the market for cattle and beef. The views are primarily formed by differing views of the economy. The majority of economists are now forecasting a soft landing and currently the interest rate market is pricing in six cuts in interest rates for 2024 starting in March. Smart money in the form of very respected hedge fund money managers are saying wait—more troubling times are ahead.
“High prices for cattle are necessary to stimulate breeders to add more cows to produce more calves. It is discouraging to all beef producers to find a marketplace with price swings that have taken feeder prices from $260-plus to $210-plus in a little over a month then posted a partial recovery. Stability is something that has been missing from the price signals necessary for a properly functioning marketplace.”
Feeder cattle markets were quiet ahead of Christmas as most auction markets were closed for the holidays; the first couple weeks in January typically show us a higher feeder cattle market. The new year should get cattle traders back in the futures markets, the fundamentals are still strong, and the longs traders should be back soon and support the markets. We do have a large front-end supply of fed cattle that need to be pushed into the pipeline. Let’s all make it a good 2024. — PETE CROW
