So far, 2024 has been pretty kind to cattle feeders, with positive calculated average monthly returns in all but January and February.
Strong, stable demand for choice beef along with declining output could be helping to keep feedlots in the black, a market analyst said.
K-STATE ASSESSMENT
Each month an updated assessment of recent feedlot returns is posted to Kansas State University’s AgManager.info website (https://www.agmanager.info/livestock-meat/cattle-finishing-historical-and-projected-returns), according to the Livestock Marketing Information Center. The series reflects a cash situation, presumes no ongoing hedging of feed or cattle price movement, and is intended to provide a barometer of profitability trends rather than precise estimates for any given feedlot situation.
The latest assessment was made July 10 and includes projected returns for cattle to be sold through March 2025.
Steers sold in June were estimated to have experienced positive net returns of $51.12 a head, the LMIC reported. This reverses a six-month trend of losses for the modeled feedlot.
Several factors underlie the improved returns in June. The LMIC said steers sold in June were modeled to have $111 per cwt cost of gain which was well below the $122 average for the first five months of 2024.
Similarly, a June fed cattle sales price of $185 per cwt being above the $182 average for the first months of 2024 further aided in turning June net returns positive, the LMIC said.
Using a different metric, the LMIC analyzed USDA data and showed that the average Southern Plains feedlot feeding 750-pound steers had a positive return of $286.04 a head in June, up from $181.64 in May but down from $406.88 in June 2023.
It should be noted that feedlots have had positive returns in the majority of months from December 2016 to the present, with 2017 and 2023 particularly good years.
OUTLOOK
Looking forward, July and August project to be positive return months before net returns become negative for the September through March period, the LMIC said. The projected switch to negative returns primarily reflected increased feeder cattle, placement prices negating comparatively small increases in outgoing, fed cattle sales prices.
While each operation has unique considerations to make in using the KSU barometer of profit trends, the broader dynamics in feed and cattle markets will remain worth watching in coming months as discussions around relative cattle supplies and status of beef demand strength evolve, the LMIC said.
Many market analysts have said they expected feeder cattle supplies to tighten in coming months as heifers are kept back from the feeder market for breeding. Cow slaughter also could decline.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $189.82 per cwt to $200.95, compared with last week’s range of $188.36 to $200.93 per cwt. FOB dressed steers, and heifers went for $300.08 per cwt to $303.80, compared with $300.74 to $312.62.
The USDA choice cutout Tuesday was down $2.23 per cwt at $319.26 while select was off $3.23 at $301.59. The choice/select spread widened to $17.67 from $16.67 with 135 loads of fabricated product and 16 loads of trimmings and grinds sold into the spot market.
The weighted average USDA listed wholesale price for fresh 90% lean beef was $375.36 per cwt, and 50% beef was $124.16.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.67 to $1.80 a bushel over the Sep corn contract, which settled at $3.95 3/4 a bushel, up $0.05 1/4.
The CME Feeder Cattle Index for the seven days ended Monday was $261.37 per cwt, sown $0.51. This compares with Tuesday’s Aug contract settlement of $258.62, down $0.15.