Stephen R. Koontz, Department of Agricultural and Resource Economics – Colorado State University

Without a doubt, the cattle markets are closing the year far stronger than I expected.  Live cattle futures have pushed into new highs and cash fed cattle prices are back to tracking the price levels and seasonal patterns of last year.  There were some unique market drivers that I discussed last month.  Most are still present, are not typical, and are worth talking through again.

The market has handled the steady seasonal climb in fed animal dress weights, continues to move fed animals in a timely manner, the packing sector continues to run substantial Saturday slaughter, and we are on the cusp of Tyson’s Holcomb facility returning to substantial operations.  Packer margins are softer but remain above $400 per head and atypically retailer beef margins continued to shrink.  I see the retailer and food service as driving the strength into this cattle and beef market.

The boxed beef composite value increased almost $30/cwt in a three-week period prior to Labor Day and repeated that performance in the five weeks prior to Thanksgiving.  The composite value at both peaks was an impressive $240/cwt.  Loin prices barely moved but ribeye and tenderloin prices were a third higher than summer.  Chucks, rounds, and lean hamburger trimming prices were also very strong.  And all this in September, October, and November when beef supplies are substantial as are supplies of other proteins.  Almost all news was positive except for the Choice-Select spread which showed its first weakness of the year declining to a seasonally strong $17/cwt.  Again, this is the first real decline of the year.  This is after spending most of the summer and fall above $22/cwt.  The Choice-Select spread has normal seasonal strength in spring months when Choice supplies are tightest and then as supplies increase over summer the spread will decrease.  The recent decline is the only weakness in a beef product market that has shown much atypical strength in the last two quarters of the year.

Cash fed cattle prices have returned to price levels observed in the fall and early winter last year along with expected seasonal patterns.  Feeder cattle on the other hand have not followed behavior in downstream product markets with the fall run of animals.  Only recently have feeder animal and calf prices creeped above that of the spring.  Optimism is rather abundant though.