Cattle Feeding Margins Dip

Cattle feeding margins last week declined as fed cattle prices dipped and feed costs for cattle sold to packers rose, according to the Sterling Profit Tracker.

The Sterling Profit Tracker is the work of John Nalivka, president of Sterling Marketing Inc., in Vale, Ore., and is published by AgWeb.

The feeding margin for fed cattle sold to packers last week was a minus $13.05 a head, compared with a minus $0.59 the previous week and a plus $27.03 a month earlier, the Profit Tracker said.  A year ago, cattle feeders lost about $8.89 a head.

To arrive at the new margin calculation, Nalivka used the USDA’s five-area direct fed cattle price of $118.61 per cwt with an initial feeder cattle price of $156.51 per cwt for 750- to 800-pound feeder steers from the Oklahoma City market.

He also used a total feed cost of $325.81 a head.  So with other costs added in, he came to a total calculated cost of $1,663.80 a head for a breakeven price of $119.55 per cwt.

 

TIGHT MARGINS AHEAD

 

And it seems good times for feeders remain elusive.  Total costs still are ahead of futures-estimated sale prices.

The Profit Tracker estimated total costs for 750- to 800-pound feeder steers entering the feedlot last week at $1,538.06 a head, leaving a calculated breakeven of $110.47 per cwt, down $9.08, or 7.60%, from the $119.55 for cattle sold to packers this week.

To get that lower breakeven price, Nalivka used an Oklahoma City auction price of $151.99 per cwt and a total feed cost of $237.53 a head.

Taking Wednesday’s fed cattle settling price of $113.52 per cwt as the eventual sale price in February when last week’s 750- to 800-pound placements are likely to be ready for slaughter, yields a sale price of about $1,530 a head.  This is slightly below Nalivka’s calculated $1,538.06 total cost for these animals.

 

PACKERS DOING WELL

 

But as skinny as cattle feeders are finding their returns on investment, packers are doing just fine, although not as well as a month ago, the Profit Tracker showed.

For cattle purchased last week, packers were calculated to have made $91.41 a head, up $0.25, or 0.27%, from $91.16 the previous week.  However, last week’s estimated margin was $39.06, or 29.9%, below the $130.47 return of a month earlier.  A year ago, the packer margin was estimated at a positive $32.31.

To reach those margin estimates, Nalivka figured in last week’s USDA five-area average fed cattle price of $118.61 per cwt and a beef cutout value of $199.07 per cwt along with a hide and offal credit of $163.55 a head.

Cow/calf operators last week had an estimated margin of $81.75 a cow on 2017 calves, down $96.25, or 54.1% from $178.00 in the same week a year ago and down $351.12, or 81.1%, from $432.87 two years earlier.

 

CASH CATTLE MARKETS STEADY TO LOWER

 

Cash cattle markets Wednesday were steady to $2 per cwt lower with trades at $118 per cwt on a live basis and at $185 to $187 dressed.

Cattle last week traded steady to lower at $118 per cwt to mostly $119 live and at 187 on a dressed basis, down $1 to $3.

The USDA’s choice cutout Wednesday was $0.09 per cwt lower at $201.75, while select was up $0.46 at $193.13.  The choice/select spread narrowed to $8.62 from $9.17 with 135 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Tuesday was $148.79 per cwt, down $0.24.  This compares with the Aug settlement Wednesday of $146.72, down $0.40.