Starting with the Martin Luther King holiday, the federally inspected cattle harvest suffered a big setback last week, with the total reflecting a 10,000-head deficit compared to the Tuesday-Thursday totals. The winter storm in the South is noted as a slaughter-reduction impact on Friday, but the head count was just a few thousand short of recent Friday production totals, reflecting 35-hour week schedules.
Tyson’s published intention to close the Lexington, Neb., plant and remove one shift from the Amarillo, Texas, plant by January 20 caused another shift in the supply chain.
In fed cattle prices: Last week’s values were slightly stronger, with the top end of reported prices in the $236/cwt. range. . The February Live Cattle contract was valued at $235/cwt. early this week and consequently provides no directional guidance beyond current spot market news.
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Compared to analyst expectations, last Friday’s Cattle on Feed Report held no surprises, as the January 1 head count was 3.2% below a year ago. The ninth consecutive month of year-on-year declines in placements saw December placements 5.4% smaller than in December 2024. The larger December marketing number, 1.8% higher than a year ago, reflects an additional marketing day in the month but a net daily marketing volume smaller than a year ago.
Carcass cutout values have primarily increased in January, although last week’s average CAB cutout value is shown as a few dollars cheaper as the quality spreads narrowed. It should be noted that Urner Barry’s $9.78/cwt. Choice/Select spread is double that of USDA’s reported value for the week. This is due to nuances in how the two entities capture and have the data weighted in the weekly information.
Seasonal Demand Shifts Carcass Values
As we wrap up January it’s apparent that the month’s carcass cutout values have held up quite well in relation to December values. Through last week, the CAB cutout price was just $3/cwt. cheaper than a month ago, by less than 1%. Evaluating the steer and heifer harvest totals shows much smaller weekly totals in January than in early December, creating a significant supply difference relative to demand.
We often discuss January as the lowest beef demand month of the year, while February likely vies for the second lowest, with the exception of a Valentine’s Day uptick. Also, we see a shift in consumer preference away from holiday middle meat roasts toward end cuts for “comfort food” meals.
Price adjustments across a variety of beef cuts are quite dramatic from the fourth quarter into the first quarter of the year. For instance, the wholesale price of the CAB lip-on ribeye roll has been 20% cheaper in the first quarter than it has been in the fourth quarter for the past five years. The January ribeye roll price downshift has been substantial with a 25% decline from the December average. This action has placed ribeye values slightly lower than in the previous three Januarys. The seasonal downturn for tenderloins is similarly sharp, with an 18% price decline from December to January.
So far, the characteristic January increase in demand for end cuts has occurred with all of the round primals either maintaining an elevated price or undergoing sharp increases. Roasting cuts from the chuck have also posted big increases, aligning with the expected January trend.
These shifts in demand affect price spreads based on carcass quality, as the cuts that command the highest per-pound premiums lose some seasonal demand through the first quarter. As cattlemen observe the current market there are questions about the decline in the Choice-Select spread and further premiums for CAB and Prime cutout values. Some have suggested that demand for premium Choice (CAB) and Prime carcasses is possibly waning. However, it’s perfectly natural this time of year as the total rib primal price drops from 170% of the cutout price to 125% and the loin drops from 132% to 126%. Meanwhile, the chuck has increased from 82% to 92% of the cutout price and the round elevated from 79% to 84% of the cutout in the December to January price changes.
Looking ahead to March, carcass quality grades should build toward the annual high percentages for the share of CAB and Prime carcasses. Potential to test or break recent records for high-quality grades is possible late in the first quarter. However, a very limited fed cattle harvest is at the top of the “issues” list during this period, so the likelihood of an overabundance of quality carcasses may very well be countered by small head counts. It promises to be an interesting season for premium beef supply.
