Despite average fed cattle prices being up $1 per cwt last week, unhedged cattle feeder losses increased marginally last week, according to the Sterling Marketing Beef Profit Tracker, which is released through AgWeb.
The estimates show average fed cattle losses totaled $387.70 a head, using the USDA’s five-area direct live-basis price of $133.49. This is up slightly from estimated average losses of $383.01 a head a week earlier and well above calculated losses of $694.99 a month earlier. A year ago, unhedged fed cattle were $3.04-per-head losers.
For those figuring everything on a price-per-hundredweight basis, last week’s five-area fed cattle price fell $29.82 per cwt short of breaking even, the Profit Tracker said.
PROJECTIONS ONLY SOMEWHAT BETTER
Price projections for fed cattle are only somewhat better for the beleaguered cattle feeder as projected losses continue well into the year.
Estimated breakeven prices for 700- to 800-pound feeder cattle placed on feed last week amounted to $126.11 per cwt. So, if fed cattle prices around the country hold at last week’s $133.49, cattle feeders could realize a $7.38-per-cwt profit. On a 1,400-pound steer, this could be about $103.32.
But things never stay the same. The futures market at Tuesday’s close projected a June price of $121.75 per cwt and an August price of $118.20. At these levels, cattle feeders would lose $11.74 to $15.29 per cwt, or $164.36 to $214.06 a head, on cattle placed on feed last week.
COW/CALF MARGINS DROP
As cattle feeding margins improved slightly last week, the estimated annual average cow-calf margin dropped to $237 per cow from $429 last year, the Beef Profit Tracker said. This is a decline of $192, or 44.8%, in one year.
The 2016 estimate of annual cow/calf returns also is down $289, or 54.9%, a cow from the 2014 profits.
Such projections could give cow/calf producers pause in their herd-expansion progress. If so, the 2016 margin for cow/calf producers could reduce the rate at which producers are holding back heifers for breeding, altering the eventual per-cow returns.
PACKER MARGINS UP SHARPLY
If cattle feeding margins rose last month, estimated packer margins jumped sharply, the Beef Profit Tracker said. The calculated margin for last week’s cattle purchased on the open market rose to $199.03 a head, up $86.14, or 76.0%, from $112.89 a week earlier.
Packer margins were up $131.59, or 195.1%, from $67.44 a month earlier. During the month, fed cattle prices rose $16.68 per cwt, or 14.3%, from $116.81, while the beef cutout rose $38.99 per cwt, or 20.0%, to $233.56 from $194.57. The drop credit, though, declined $4.21 per cwt, or 2.61%, to $157.03 per cwt from $161.24.
CASH CATTLE QUIET
Cash cattle markets Tuesday were quiet with no trading reported. Bids and offers were not heard around the Plains feeding areas.
Cattle trading last week ranged from $132 to mostly $133 to $134 per cwt on a live basis, up $1 from the previous week. On a dressed basis, cattle traded at $209 to $212, down $1 to $2.
The USDA reported lower wholesale beef prices Monday, with choice off $1.35 per cwt from Friday at $229.93, and select down $1.24 at $223.70. The choice/select spread narrowed to $6.23 from $6.34, and there were 101 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Monday was $159.89, UP $160.35. This compares with the Jan settlement Tuesday of $156.55, up $2.25.