Cattle Feeding Returns Slip Further

Fed cattle prices faltered again this week, taking returns to cattle feeders further into the red.  Other cattle owners have dug in their heels, refusing to accept lower bids from packer buyers.

But since good times and bad come to feedlots all the time, it’s hard to visualize the plight of those who feed cattle over the long term.  A graph from the Livestock Marketing Information Center showing the monthly average returns to cattle feeders feeding 725-pound steers in the Southern Plains shows that cattle feeders lose money most of the time.

It’s little wonder, then, that cattle owners are resisting current packer bids, even though their success is limited.

Cattle in the Plains this week have sold in a range from $145 to $149 per cwt on a live basis, down $2 to $3 from last week, which was down $2 from the previous week.  In addition, data show that, on average, unhedged cattle feeders have lost money on every animal sold for the last eight months.

Prior to that, though, unhedged cattle feeders turned a profit in 12 of 14 months.  It was the longest stretch of profitability since the graph began in 2006.




On the way to a profitable or unprofitable return for the cattle feeders is a market that will keep much of the returns.  Data show that the average monthly live-to-retail price spread is record wide through July at $1,364.41 per 1,000 pounds.

Last year, the live-to-retail price spread dropped in June and July, almost getting back to the average of the previous five years before bouncing again in August.  But last year’s returns to feeders didn’t follow any of the rules, peaking in May and August.

Price trends show an average price of live-to-retail price spread peaking in July and then heading lower into October.  A short spike then appears in November.

Since this year’s live-to-retail price spread is following the 2009-2013 average, although at a higher level, a case could be made for the trend to be extended as the year progresses.  What’s more, the difference between this year and the average is so wide, it would be difficult to envision this year’s spread ever dropping that low.




Beef packers also are having trouble getting good returns from the retail market.  Data show the cutout-to-retail price spread rising to new heights in July, and the average of previous years declining in August and September.

This spread has been wider than the 2009-2013 average in all months this year except January.  It also has been less variable than last year’s spread and following the five-year average trends closely, even though the line is much higher.

This shows that the packer is not to blame for the cattle feeders’ profit woes.  Market analysts blame increased competition from other meats that allows the retail or foodservice meat buyer to keep more of the retail price of the beef.




Cash cattle markets traded higher Thursday with cattle changing hands up to $149 per cwt on a live basis from $145 on Wednesday.  Still, the range is $2 to $3 lower than last week’s $148 to $152.  Cattle also traded at $232 to $234 on a dressed basis this week, about $2 to $4 lower than last week.

However, many sellers clung to their asking prices of $152 live and $240 dressed so trading this week has not been active.

The USDA reported lower boxed beef prices Thursday with choice down $0.32 per cwt at $246.46 and select off $0.86 at $235.58.

The CME Feeder Cattle Index for the seven days ended Wednesday was $215.97 per cwt, down $0.75.  This compares with the Aug settlement Thursday of $213.20, down $0.60.