Category: Livestock Marketing

As cattle prices and the boxed beef cutout have increased, so have briskets.  Higher brisket prices are starting to hit restaurants and home BBQ’ers.  Fewer cattle going to market and tighter beef supplies will pressure beef prices for all cuts, briskets included. 

For the year, through the week ending May 13^th, beef production is down 4.7 percent compared to last year.  Steer slaughter is 4.7 percent below last year and heifer slaughter is 0.3 percent more than last year.  The number of cattle going to market is important for briskets because each animal has two and briskets are a cut that is often sold as the whole primal.  In addition, steer and heifer dressed weights are below a year ago, so total pounds of brisket available is further reduced. 

Prime grade briskets were $2.43 per pound for the week of May 12^th.  Even though price has come down 6 cents over the last 3 weeks it is 16 percent higher than the first of the year and 11 percent higher than a year ago.  Choice, branded, and Select quality grade brisket prices are up similar percentages to Prime since January and compared to a year ago.  

Typically, branded briskets (briskets like certified angus beef or other brands) have the highest price meaning that other quality grades, including Prime, trade at a discount in the wholesale market.  Since February, Prime briskets have commanded the highest price in the market.  That price strength is likely related to slightly fewer cattle grading Prime and more Choice than a year ago.  Many smaller, high end BBQ restaurants source Prime and branded briskets due to their cooked qualities.

What might we expect in our favorite brisket BBQ spots in coming months?  Tight beef supplies and reduced slaughter will keep the pressure on for higher prices.  Restaurants will face higher costs and their ability to pass those on in the form of higher prices might be limited.  Even though less beef is produced leading to higher prices, fears of a recession, reduced consumer incomes, and spending may limit the ability to pass on higher costs. 

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Anderson, David. “Brisket Prices on the Rise.” Southern Ag Today 3(20.2). May 16, 2023. Permalink

Photo by Hayden Walker: https://www.pexels.com/photo/a-person-slicing-barbecue-beef-brisket-9397270/

The number of feeder and stocker cattle sold during the first four months of 2023 was about four percent higher than during the same period in 2022 according to data from the USDA-AMS National Feeder and Stocker Cattle Summary.  Strong prices, persistent drought in some regions, and the timing of wheat pasture cattle movement likely contributed to these higher totals despite the smaller calf crop in 2022. 

Shown in the chart above, receipts have generally followed the seasonal pattern of declining sales through the first four months. This dataset includes auction, direct, and video/internet sales that are reported to USDA. It does not capture all feeder and stocker cattle transactions and the report notes that “receipts vary depending on the number of auctions reported” – but comparisons over time can be informative when considering current market dynamics to previous years.  

On the surface, the stronger receipts totals are at odds with the 2 percent smaller calf crop in 2022 than in 2021. However, the data are most likely indicating market timing differences instead of changes in total cattle inventory. Cattle prices have been significantly stronger this year as compared to a year ago and drought continues to be a key issue in Texas, Oklahoma, Kansas, Nebraska and other areas which is limiting grazing opportunities. These factors have likely led to more cattle moving into feedlots or grow yards earlier than normal. Compared to the 5-year average from 2017-2021, receipts are one percent lower so far in 2023.

The report also gives information about the mix of steers and heifers and weight ranges and suggests slightly fewer heifers and lighter cattle have been sold this year.  Heifers represented 40.9 percent of the stocker and feeder cattle sold during the first 4 months of 2023. This is about one percentage point lower than in 2022. The percent of cattle sold weighing above 600 pounds is also lower at 72.6 percent compared to 73.9 percent a year ago.

Looking ahead, auction receipts will increase seasonally as summer arrives. However, overall supplies this year are expected to be smaller. The estimate of the expected calf crop for 2023 will be released on July 21st as part of the mid-year USDA Cattle Inventory report.

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Maples, Josh. “National Feeder and Stocker Cattle Receipts Higher to Start 2023.” Southern Ag Today 3(19.2). May 9, 2023. Permalink

Photo by Mark Stebnicki: https://www.pexels.com/photo/brown-cattle-2253553/

USDA released the April Cattle on Feed report on Friday, April 21^st. This monthly publication estimates the number of cattle on feed at feedlots with a capacity of over 1,000 head and serves as a measure of likely beef production over the next several months. While the cow herd has been decreasing in size for several years, an increase in the number of heifers in the beef system kept on-feed numbers running relatively high for much of 2022. Finally in the fall, the long-expected shift occurred, and on-feed numbers have been running below year-ago levels since then.

In Friday’s report, April 1, 2023, on-feed inventory was estimated to be down about 4.5% from April 1, 2022. While this might not immediately raise any eyebrows from casual observers, this on feed number was higher than expected and really came down to March placements being greater than most pre-report estimates. The net effect was that total on-feed inventory was virtually unchanged from March 1 to April 1, which was counter to what many expected. 

Heifers continue to make up a historically large proportion of cattle on feed.  Fewer heifers were reported on feed than on April 1, 2022.  While steers on feed declined by 6 percent, heifers on feed were only down about 1.7 percent from last year.  That indicates that there has not been a large movement in holding back heifers yet. 

There are some possible explanations for the larger-than-expected March placements number. First, March is a month when cattle are often moved off wheat pasture and continued dry weather combined with high wheat prices, likely impacted movement of feeders. Secondly, live cattle imports from Mexico were higher in March. So far this year, feeder cattle imports from Mexico are up about 95,000 head from last year.  But it’s worth remembering that feeder cattle imports in 2022 were the fewest since 2008.  Finally, there is still a lot of carry on the feeder cattle board, meaning that feedlots have been aggressively buying feeders ahead, in anticipation of the rising price levels suggested by deferred live cattle futures. Put simply, I absolutely think that feedlot placements bears watching in the coming months, but I suspect the larger placement number last month has more to do with timing than a major shift in market fundamentals. 

For the last three years, Clemson Cooperative Extension has been heavily involved in researching local meat supply and demand. Extension associates interviewed and surveyed livestock producers, processing facilities, and local meat consumers. As a result of this research, South Carolina is the most recent of the southern states^[1] to invest in expanding local meat processing. 

Assuming these investments solve local processing bottlenecks, the consumer demand study results are now the most important piece of the puzzle: will consumers purchase additional amounts of locally raised meat? The South Carolina consumer study seeks to provide direct-to-consumer livestock producers with additional marketing information for locally raised beef, chicken, pork, turkey, lamb, and goat. A summary of the results:

Consumers of locally raised meats

• Consumers tend to be younger (<45 years of age), reside in larger households, have higher educational attainment and household income, and are long-term residents of South Carolina.
• Local meat consumers are generally willing to pay up to a 24% premium for locally raised meats to eat at home, and this holds true for all meats studied. 
• Beef is the most popular local meat consumed, which is different from overall US meat consumption, where chicken is the most consumed meat.
• The most desirable attributes of local meats are hormone-free, all-natural, no antibiotics, and grass-fed. Knowing the farmer was the lowest ranked, or least important, attribute.

Marketing challenges and opportunities for locally raised meats

• Stated barriers to purchasing (or purchasing more) locally raised meats are product unavailability, high prices, food safety concerns, convenience, and ease of preparation.
• Consumer-preferred buying locations (ranked) were grocery stores, directly from farms, farmers markets, butcher shops, and online orders. 
• Most consumers are unwilling to drive more than 20 miles to purchase locally raised meat.
• Due to the first three bullets in this section, availability becomes a larger issue: locally raised meats are not typically offered in grocery stores, consumers are unwilling to drive to remote farms, farmers markets have limited days and times of operation, and there are relatively few specialty butcher shops.
• Ease of preparation is important, and most locally raised meats are sold frozen.  
• Consumers are accustomed to seeing meats on display before purchasing, while many direct-to-consumer livestock producers at farm markets keep their meats in closed coolers.

The full study, with additional findings and research, is published in an open-access journal at this link https://doi.org/10.5304/jafscd.2023.122.009.  Also, please feel free to contact the author with any questions.

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^[1] According to the Niche Meat Processing Assistance Network (www.nichemeatprocessing.org), Arkansas, Kansas, Kentucky, Missouri, North Carolina, and Oklahoma have also invested in local meat processing facilities.

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Richards, Steven Todd. “Marketing Locally Raised Meats? Lessons Learned in South Carolina.“ Southern Ag Today 3(17.2). April 25, 2023. Permalink

Photo by Pixabay: https://www.pexels.com/photo/agriculture-animal-beef-bull-301600/

There’s a lot going on in livestock markets but we can’t keep our eyes off the fed cattle market where prices soared again last week to another record high for the third week in a row.  Surging live fed cattle prices are pulling calf and feeder cattle prices along for the ride. The cutout value is beginning to increase but there are not a lot of effects yet on retail beef prices.  This week we’ll take a brief look at packer and retailer margins stemming from these changes in the live market.

Prices and Margins

Fed cattle prices got well into the $180s per cwt with $182-$183 in Iowa and Nebraska.  Kansas and Texas were about $175 per cwt.  The weekly 5-market weighted average was $180.44.  The Livestock Marketing Information Center estimated cattle feeding average returns were positive from September through March 2023.  The increase in fed cattle prices indicates that cattle feeding returns will continue to be positive in April.  

The Choice cutout value averaged about $297 per cwt last week.  But, it increased throughout the week, and by Friday it was $302 per cwt and $305 on Monday morning.  The live-to-cutout price spread is often used to indicate packer margins.  As such, it should be taken with a big grain of salt because it does not include the packer’s costs.  It is simply the difference between the cost of the cattle and the value of wholesale beef plus the drop credit.  The live-to-cutout spread was $259 in March compared to $385 a year ago.  Recent price moves indicate a spread of about $237 in mid-April.  

Similar to the live-to-cutout spread, we can calculate a cutout-to-retail price spread that reflects a retail (grocery store) beef margin.  It, too, has to be taken with a grain of salt because it does not include their costs which includes the cost of product that does not sell.  Retail beef prices have been relatively flat at about $7.60 per pound for more than a year.  The March retail Choice price was $7.64 per pound.  The cutout-to-retail spread was $1.47 in March compared to $1.65 in March 2022.  The 5-year average spread was $1.17 per pound.  It’s likely that this spread will tighten as the cutout increases. Keep in mind also that beef production is expected to decline by about five percent in 2023.  The market will likely test the consumer’s willingness and ability to pay more for beef in coming months.  

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Anderson, David. “Another Week, Another Record.” Southern Ag Today 3(16.2). April 18, 2023. Permalink