It looks like packers are starting to gear up for spring beef demand. Slaughter levels are picking up. Over 610,000 head were processed most recently—they haven’t processed over 600,000 head for the past six weeks. The fed markets are starting to push higher to fulfill the demand; most retailers have planned for middle meat features in their stores, usually a loss leader.
The Choice cutout has performed well, trading at $3.13/lb. We will see how this holds up going into demand season. Fed cattle sales were slow to develop, it seems like everyone waits for the Cattle on Feed report before they pull the trigger. As of Wednesday, the fed markets were moving higher. I saw some 1,500-lb. steers sell for $194 at the Lanesboro auction in Minnesota. Most market watchers were expecting the market to be $1-2 higher.
Cassie Fish of The Beef pointed out: “Managing throughput during tight cattle supplies is a balancing act as packers need to run as many hours as they can given that costs increase on less throughput while high-priced cattle costs force them to ration that tight supply. And that is exactly where the fed cattle industry finds itself today.
“Packers have been able to keep red ink at a minimum but have not been able to avoid it. Lastly, no one knows when the consumer rations beef purchases because of prices. It happened in 2015 and it likely will occur this cycle.”
As a matter of fact, all markets have moved higher. The salvage market for cows/bulls is remarkable, with cull cows trading at $130 and bulls up to $150. The demand for 90% lean trim is driving these markets: 90% lean was trading at a record high of $323 and 50% lean was at $104. The demand for ground beef is insatiable.
Kirk Donsbach of Stone X Trading said, “There is a developing story in the Texas Panhandle regarding dairies and an unknown element that may or may not be a market mover. The affliction causes a 10-30-lb. drop in milk production in affected animals. It is likely that most of the animals displaying symptoms from this ailment are being slaughtered. At this time this is an isolated event that, although horrible for those involved, is not a market mover. It does have the potential to be a much larger event.
“Due to the limited amount of knowledge on what it is or how it spreads I am unsure if the market will care, is it short-term bearish on the market relative to an increase in cull cows, or bullish as it potentially further decreases future inventory. To be clear this ailment has only been found in dairy cattle at this time. It has been identified in about 14 dairies, with 5-20% of those herds showing signs of infection. This potentially being a new bacterial respiratory disease that could spread to the beef cow herd is the greatest risk relative to the market. That has not been confirmed!!”
Now USDA has come up with a new meat labeling rule, which is voluntary. This tells me that no one will use the label unless they really believe country-of-origin labeling has any real value. I don’t think so. NCBA put out a statement: “USDA reinforces the new rule will be voluntary in application and will comply with international trade obligations. Under the new rule, those who choose to voluntarily market beef products (steaks and ground beef) specifically as ‘Product of USA’ and ‘Made in the USA’ may do so if the product is derived from animals born, raised, slaughtered and processed in the United States.
“The rule also allows for other qualified claims indicating a preparation or processing step of the product is of U.S. origin. These claims must be backed by descriptions of the controls used at each step of production to verify the claims. Similarly, the new rule applies to products that carry origin claims for states, territories and localities. The new rule only applies to products sold in the domestic market, and exported products must comply with the requirements of the applicable country. Establishments that choose to use voluntary origin claims must comply with the new requirements by Jan. 1, 2026.”
We had some big snow in the Colorado mountains recently. Five feet in some areas, and the snowpack is well over 100%. Let’s hope it doesn’t melt too fast. Regardless, let’s continue to pray for spring rains. — PETE CROW
