MARKET UPDATE
DEMAND IS KEY
By Terrel Platt, Analyst CattleFax
The beef complex has extended its run of robust demand through the start of 2025 with the composite cutout averaging $ 325 / cwt year to date which is $ 28 / cwt above last year. The year-over-year performance is the second largest increase in the last 20 years, eclipsed only by 2014. Furthermore, the current pace puts the cutout in a position to establish a new record on an annual average basis. Considering fed beef production is up 134 million lbs( 1.8 %) year to date from 2024, demand has clearly been the driver of significant price gains. Unlike 2024 where increases were concentrated in the chuck and round complexes, this year’ s gains have been broad based in both middle and end meats.
In the near term, as the weather warms and summer approaches, the beef complex tends to stage a seasonal rally as buying picks up for the summer holidays. The loin complex will be the key driver of further gains, but the rib has provided additional support. The cutout is expected to gain traction as summer demand unfolds, with price potential projected from $ 350- $ 360 / cwt in May or June. Once demand peaks seasonally, the cutout is expected to take on a lower trend with support in later summer and early fall projected between $ 315- $ 320 / cwt.
The leverage ratio between fed prices and the composite cutout has averaged near 59.5 % year to date. Fed cattle supplies are expected to remain favorable in the next 30-
Overall, demand has continued to show considerable resilience in the face of economic uncertainty. Up to this point, retail beef prices have continued to increase and have outpaced inflation, while unemployment remains historically low. Real consumer incomes also remain historically high, providing a layer of support underneath demand. However, consumer sentiment has soured with concerns about rising inflation due to tariffs and the potential for an economic slowdown weighing on consumers’ outlook. If negative sentiment begins to translate to pushback of record beef prices or an economic slowdown stresses consumer spending power, demand will likely adjust lower from current levels.
60 days which will be supportive of leverage and restrictive to packer margins. Given the expectations for support and resistance in the cutout, cash fed prices have potential towards $ 225 / cwt or better on a U. S. average basis with support anticipated from $ 195 to $ 200 / cwt later in the summer or early fall.
Bottom Line: As the beef complex starts to shift higher in the coming weeks, leverage is expected to hold in cattle feeders’ favor. Assuming a modest rally to $ 355 / cwt and 59 %-60 % leverage, which is slightly below packer breakeven, implies a U. S. average fed price of $ 221- $ 228 / cwt with upside potential if leverage or the beef complex outperforms those assumptions. www. NCBA. org NATIONAL CATTLEMEN 17