Unhedged cattle feeders continued to lose money on every animal sold for slaughter last week, although they did make up some ground, according to the Sterling Beef Profit Tracker.
The calculations by Sterling Marketing, Vale, Ore., and published by AgWeb, estimated that cattle feeders lost $171.92 a head on the cattle sold last week, using the USDA’s five-area direct weighted average price.
A week earlier, cattle feeders lost an estimated $206.35, but losses a month earlier were put at $155.56. A year earlier, they were making $216.03 a head.
Things may not get better when the calves that were placed on feed this week mature. Estimating the cost of feed and the price of feeder cattle, the Profit Tracker calculated the average price feedlots would need to break even on their investment would be $162.16 per cwt. For comparison, the USDA’s five-area fed cattle price last week was $161.72.
This is why many would-be cattle feeding investors currently are pasturing calves for as long as is practical and then selling them for others to feed.
BEEF PACKERS MAKING LESS
Beef packers last week likely made $24.58 a head on the cattle slaughtered and processed, down from $44.91 the previous week, but well above the $22.32 loss they were working with a month earlier and the $47.52 loss of a year ago.
Packer buyers paid a weighted-average $161.72 per cwt for slaughter cattle last week, up $0.98 from $160.74 a week earlier. The average beef cutout price was figured at $254.33 per cwt, down only $0.46 from the previous week’s $254.79.
The drop credit, or the value of the hide and offal to the packer, fell $1.82 per head to $189.66 from $191.48 a week earlier. A month earlier, the drop credit was $196.13, and a year ago, it was $210.46.
Because of the declining margins and the historical proximity to losses, packer buyers continue to be very aggressive negotiators, withholding bids until midweek and paying more only when forced to do so by strong meat orders or tight fed cattle supplies.
BEEF CONSUMERS CHOOSING CERTIFIED
More and more, beef consumers are learning the taste qualities of branded beef, Certified Angus Beef in particular, and they’re switching where possible.
Kansas State University economist Ted Schroeder and Cattle-Fax analyst Lance Zimmerman recently updated a demand model comparing USDA choice and CAB, and the results, related in a Drovers story, are startling. Giving each a demand index rating, consumer preference for CAB over USDA choice began to diverge noticeably in 2010 and continued through last year with demand for choice beef declining from 2010 through 2013 and demand for CAB product continuing to rise to record levels each year.
However, Zimmerman said the soaring demand for CAB is volume driven as more heavy carcasses are being produced, lifting a few more cattle into the marbling characteristics demanded of CAB. He says the CAB market now is a market-share battle with choice product.
CASH CATTLE QUIET
Cash cattle markets remained quiet Wednesday with bids at $157 to $158 per cwt on a live basis and offers at $163 to $164. Dressed-basis bids were scarce with asking prices at $258 to $260.
Beef prices Tuesday were higher, with the USDA reporting its choice cutout at $263.17 per cwt, up $2.21, and the select cutout at $249.11, up $1.36.
The CME Feeder Cattle Index for the seven days ended Tuesday was $219.17 per cwt, down only $0.09, compared with the May futures settlement Wednesday of $219.00.