Cattle Feeding Margin Gains Not Enough

Cattle feeding margins improved last week, but the nation’s feedlots continue to lose money, according to the Sterling Beef Profit Tracker, which does not take into account the individual hedging operations of feeders.

Despite rising nearly $25 a head last week as fed cattle prices rose, and feed costs declined, margins remained more than $32 below breakeven.  A year earlier, feedlots were making $145 on every animal that went to slaughter.

Feed costs were nearly $8 a head lower in the latest calculations, which helped improve the bottom line for cattle feeders, and slaughter cattle prices rose $1 to $1.50 per cwt, but it wasn’t enough, the Profit Tracker said.

Last week’s cash cattle prices ranged from $160 to $162 per cwt on a live basis, yet the average breakeven price was calculated in the Profit Tracker’s report at $163.11.

But while feedlot margins were improving, beef packer margins were declining.  Wholesale beef prices declined during the week, and packer margins were cut about $45 a head to $52.  This compares with packer margins of about $58 a head in the red a month ago.  A year ago packers were losing about $56 a head.

This week, beef prices continued to decline with the USDA’s choice cutout price Thursday at $239.10, down $0.64 from Wednesday but down $2.08, or 0.86%, from $241.18 a week earlier.

Things look rosier for cow/calf producers, however, with the calculations showing continued profits.  Estimated margins totaled a positive $579 a cow, compared with a positive $548 last year.




As cattle feeding margins continue to struggle, farrow-to-finish pork producer margins were unchanged at a positive $13 a head, the Profit Tracker said.  However, hog prices are declining and are about $4 per cwt lower than a year ago.

The USDA also projects lower prices for hogs and cattle for this year so producer margins likely will suffer.

Pork packer margins declined about $2 a head, but they remain in the black to the tune of about $11 a head.

Lower feed costs may lead to lower pork prices over the next 10 years as beef and pork production increases, the USDA said.  Initially, prices may be somewhat stable as feed prices decline and returns increase, but as the beef industry expands and production increases, competition likely will heat up.

Global meat consumption also is expected to rise, with poultry outpacing beef or pork, the USDA said.




No trading has been reported in the Central and Southern Plains this week.  Packer buyers are bidding $161 per cwt on a live basis, in the middle of last week’s range of $160 to $162, making many think that sales prices could top last week when the dust settles on this week’s cash trade.

No bids were reported in Nebraska’s dressed market, but asking prices were about $261 per cwt, compared with last week’s range of $256 to $260.

Some traders report packers are short on cattle inventory for next week’s slaughter schedules.  Buyers’ firm bids may be evidence of such demand, but sources said waiting until Friday to trade somewhat belies rumors that packers are short bought.

Boxed beef prices were lower Thursday with the USDA’s choice cutout down $0.64 per cwt at $239.10, and select off $1.17 at $235.19.  Volume was fairly light with 83 loads sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was $210.93 per cwt, up $1.09 for the day.