Cattle and beef prices showed some improvement last week, but large numbers of heavy cattle appear to be creating a drag on the market. USDA reports an average fed-steer price of $81.21 per hundredweight last week, about a 50-cent improvement from the previous week. Boxed-beef prices helped drive some optimism, improving to $135.29 per hundredweight, and much of the gains were late in the week, suggesting the trend could continue into this week. Slaughter numbers, at 629,000 last week, were down slightly from the previous week and from one year ago, but with slaughter weights averaging about nine pounds heavier, beef production was up a little over 1 percent from one year ago.

According to the Texas Cattle Feeders Association, discounts on heavyweight cattle are one of the factors limiting gains in the cash market. TCFA analysts note that the current live-to-cutout ratio is 61.52 percent, compared with 63.6 percent at this time last year. The five-year average for this time of year is 65 percent, indicating the cash market is significantly undervalued in relation to wholesale beef prices. Based on current cutout values, TCFA notes, a live-to-cutout ratio of 63.6 percent would produce a cash price of more than $85 per hundredweight. The five-year average ratio of 65 percent would provide a cash price over $87.

For more detailed information on cash markets, see USDA’s Five-Area daily weighted average direct slaughter cattle report.