Cattle Feeding Margins Heading South

Calculated feedlot margins are dismal and set to get worse before they get better.

Average margins dropped $52.44 a head last week for unhedged cattle, and with cash cattle prices dropping $5 to $10 per cwt this week, feeding returns are sure to get worse this week.

The Sterling Beef Profit Tracker from Sterling Marketing and published by AgWeb shows average feeding margins dropped to a minus $357.47 a head last week from $305.03 the previous week.  A month ago, feeders were losing a mere $127.04 a head.  Last year, feeders were making $186.37 a head.

Beef packer margins last week slid as well as beef prices sagged seasonally, but the margins remained very positive at a plus $129.08 a head, compared with $141.67 a week earlier and $83.77 a month earlier.  A year ago, packers were losing $10.54 a head.

The cost of feeder cattle is going down along with live cattle as more calves come off pasture, are weaned and sent to the auctions, but if fed cattle prices don’t rise or feed costs plummet, feeding margins likely will remain in the red.

Denver’s Livestock Marketing Information Center shows the margin between 700- to 800-pound feeder steers in the Southern Plains and fed cattle prices in the same area has improved for feedlots since June but remains well above the 2009-2013 average.

The Profit Tracker calculated breakeven price for cattle placed last week was $151.16 per cwt, down from the prior week’s $156.65 and the $160.81 of a month earlier but still well below last week’s USDA five-market average price of $135.19.

 

PORK PRODUCTION PROFITABLE

 

Pork producers, on the other hand, showed a profit last week of $11.39 a head, an increase of $3.70 from $7.69 the previous week, although $14.07 lower than a month ago, the Sterling Profit Tracker said.  A year earlier, farrow-to-finish margins were a plus $54.12.

Average butcher hog prices, at $69.78 per cwt last week were up $1.03 from the previous week’s $68.75 but were down $8.24 from $78.02 a month earlier.  A year ago, hogs were bringing $106.46 per cwt.

That increase in lean hog prices ate into pork packer margins, which declined $5.87 a head to $16.04 from $21.91 a week earlier.  However, last week’s packer margin was up $5.63 from $10.41 a month earlier and up $11.56 from a plus $4.48 a year earlier.

 

CASH FED CATTLE TRADE LOWER

 

Cash cattle prices in the Plains and Western Midwest this week were down $5 to $10 per cwt with action in Iowa at $126 to $128 on a live basis with dressed action at $203 to $205.  Nebraska trades were reported at $129 to $130 live and $208 down to $202 dressed.  Trading also was reported in Kansas and Colorado and Texas at $128 to $130.  In all cases, the lower prices came later than the higher prices.

Last week, cattle traded at $135 to mostly $136 per cwt on a live basis and $214 to $215 on a dressed basis.

The USDA reported sharply lower boxed beef prices Thursday with its choice cutout down $3.04 per cwt at $214.85 and select off $1.89 at $211.62 with 134 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was $195.75 per cwt, down $1.09.  This compares with the Sep futures settlement Thursday of $194.22, down $0.72, and the Oct settlement of $180.10, down $2.27.