Cattle Feeding Margins Drop With Last Week’s Prices

Cash cattle marketers have few friends this week after prices last week slid $4 per cwt and took cattle feeding margins even deeper into the red.

The weekly Sterling Profit Tracker from Sterling Marketing in Vale, Ore., and published by AgWeb said last week’s price slide ripped $77 a head in value away from cattle feeders, taking per-head losses on unhedged cattle to $174.80 from $97.57 a week earlier for a 79.2% drop.

A year ago, feedlots were making $210.79 a head on every animal sold, for a 182.9% drop.

And while estimated packer margins improved with last week’s $3 fall in prices, they remain in the red.  The profit tracker judged them to be running a $15.57-per-head deficit on cattle purchased last week.  This is a gain of $25.50 per head, or 96.1%, from a loss of $41.07 a head a week ago and a $48.03, or 75.5%, rise from a minus $63.60 a year ago.

 

FEEDER CATTLE COSTS UP

 

The cost of the feeder cattle used to figure last week’s average packer margin was up $3.16 to $239.20 per cwt from $236.04 a week ago.  However, the cost of feeders for last year’s dales was much lower at $165.88 per cwt.

What’s more, the price of feeder cattle keeps going higher.  The price of feeders for calves placed on feed last week was figured at $215.94 per cwt, up $0.15 from $215.79 a week earlier.  A year ago, calves placed on feed averaged $174.92 per cwt.

 

FEED COSTS DOWN

 

But feed costs are down from a year ago.  Feed costs used to figure the latest feeding margin were $212.10 a head, down $167.19, or 44.1%, from $379.29 a year earlier.

For cattle placed on feed last week, however, estimated feed costs were up again, calculated at $300.84 per animal, compared with the $212.10 estimate for cattle sold for slaughter last week.  Still this was down $35.48, or 10.5%, from $336.32 a year earlier.

 

BREAKEVEN PRICES MIXED

 

The breakeven price, or what is needed to cover all costs with nothing left over for profit, is a mixed bag, according to the Profit Tracker.  The average breakeven price for cattle sold to packers last week was $176.45, up $42.74, or 32.0%, from the $133.71 of a year ago.

The average breakeven price for cattle placed on feed last week was $162.45 per cwt, down from $162.80 a week earlier, but up $16.79, or 11.8%, from $142.66 a year earlier.

Those cattle still have a potential to lose money with the Oct futures price settling Wednesday at $150.50 per cwt and the Dec contract pegged at $151.25.

 

CASH CATTLE MARKET TRADES LOWER

 

Cash cattle markets Wednesday remained slow, but the USDA reported 1,377 head of steers selling in the Plains Wednesday at $162.43 per cwt on a live basis, steady to $1 lower than last week’s lightly tested $163 to $165.50 market.  Sales of 3,233 heifers were similarly priced at $162.39.

Dressed-basis prices also were lower Wednesday, but trading was very light.  A total of 905 steers sold at $255.80 per cwt, while 42 heifers changed hands at $256.00.  Last week’s dressed-basis trade was at $261 to $263.

The USDA’s choice cutout was higher, with choice up $2.35 per cwt at $260.80, while select was up $1.80 at $251.22.  The choice/select spread widened to $9.58, and there were 98 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Tuesday was unchanged at $219.28 per cwt, compared with Wednesday’s settlement of the Apr futures contract at $214.22, up $2.02.