Cattle feedlots saw their margins improve this week as fed cattle prices rose $2 to $4 per cwt on a live basis in the Southern Plains, although fluctuating corn costs likely gave some managers indigestion.
Feedlot margins were minimal last week, according to the Sterling Profit Tracker, averaging only $8.28 a head. A week earlier, profits were $21.94, and a month ago they were $44.96. Last year, fed cattle were netting feedlots $79.76 a head.
Slaughter-ready cattle traded this week at $168 to $172 per cwt on a live basis in the Southern Plains and at $268 up to $272 on a dressed basis in Nebraska. The gain will help the bottom lines for cattle feeders.
Mar corn futures gapped higher on Monday but ran into trendline resistance and fell away on Wednesday to fill the gap on daily bar charts. The contract settled Wednesday at $3.96 ¼ a bushel and was up $0.01 ½ to $3.97 ¾ at 5:35 a.m. CT today.
The Profit Tracker’s calculated average breakeven price for calves weighing 750 to 800 pounds from the Oklahoma City auction and going directly to the feedlot this week is $164.99 per cwt. This is up from last week’s $160.13 and last month’s $163.31, but is lower than the $131.94 a year ago.
BEEF PACKERS STILL LOSING
Beef packers, on the other hand, continue to lose money. The Sterling Profit Tracker calculated plant losses last week at $49.96 a head, compared with $45.19 last week, $70.26 last month and $75.99 last year.
The packer margin calculations for last week’s red ink include choice steers at $165.63 per cwt, a beef cutout value of $245.23 and a drop credit of $222.99 a head.
The continued losses by packers make many cattle traders nervous about fed cattle and futures prices. Futures already are at a discount to cash with the nearby Feb contract settling Wednesday at $165.90 per cwt, versus cash prices this week up $4 at mostly $170.
The longer they continue, packer losses will become increasingly important to cattle traders who figure packer buyers will become increasingly resistant to higher fed cattle prices.
However, part of this week’s cash market gains can be attributed to the arctic blast that blanketed most of the lower 48 this week. Cattle will not grow or fatten as fast during this period since they are using more of their feed just to outlast the cold, so feedlot showlists may be smaller in coming weeks, forcing higher prices.
BEEF PRICE GAINS HELP PACKERS
Beef packer margins were helped again Wednesday as beef prices rose sharply with good demand meeting only moderate offerings. The USDA reported its choice cutout value Wednesday at $252.75 per cwt, up $2.42 from Tuesday. Its select cutout value was $242.12, up $2.07. For the week, choice was up $3.85, and select was up $3.55.
Beef sales also were active Wednesday, with 161 loads of fabricated product sold into the spot market.
Select and choice ribs, rounds and loins were steady to firm, while chucks were higher. Trimmings also were higher with moderate to good demand and only modest offerings.
The choice/select spread is near average at $10.63, compared with last year’s $5.80. The previous five-year average is $10.17.