Feedlot Losses Mount Despite Cash Gains

Fed cattle prices last week gained about $3.00 per cwt last week, but US feedlot losses still rose about $3.00 a head as the cost of replacement feeder cattle rose about $5.00 a head, according to the weekly Sterling Beef Profit Tracker.

Beef packers, however, emerged from red ink to notch profits on every animal processed.

Feedlot margins as of last week were put at a minus $153.21 per head, down from $150.33 a week ago and well below the minus $32.32 of a month ago.  A year ago, feedlots were banking $233.83 a head.

The cost of the 750- to 800-pound feeder steers at the Oklahoma City auction assumed in the latest Profit Tracker calculations for the fed steers sold for slaughter last week rose to $237.17 per cwt from $232.53 a week ago and $219.28 a month ago.  A year ago, the feeder cattle cost of fat steers was $161.00.

Feed costs for fed cattle sold last week were estimated to be $274.34 per head, up slightly from $274.19 the previous week but below the $288.26 of a month ago.  A year ago, those costs were estimated at $344.50.

The calculated average breakeven price for steers sold for slaughter last week was $173.13 per cwt, against $170.23 a week ago and $163.11 a month ago.  Last year, the average breakeven price on fed cattle was figured at $131.31.

As a frame of reference, the calculated average breakeven price of cattle placed on feed last week was $155.35, up from $152.76 a week earlier but down from $159.31 a month ago.  A year ago, the calculated breakeven on feedlot placements was $138.17.

 

PACKER MARGINS EMERGE FROM RED INK

 

Meanwhile, calculated packer margins last week emerged from a sea of red ink to post profits of $3.94 a head from a minus $16.75 the previous week, even though the cost of choice steers in Texas and Oklahoma rose to $161.34 per cwt from $158.67 the previous week, the Profit Tracker said.

Credited with the gains in packer profit margins were jumps in beef and by-product values.  The USDA’s average beef cutout after adjusting for the percentage of choice and select in the mix was $248.33 per cwt.  This was up from $244.95 a week earlier and $240.38 a month earlier.  A year ago, the adjusted beef cutout was $232.88.

The average drop credit, after adjusting for yield, last week was $200.29 a head, up from $199.29 a week earlier but down from $212.66 a month ago and last year’s $213.12.

 

FORECAST CATTLE PRICES STRONG

 

Fed cattle prices in the Plains currently are well above the nearby futures price.  The latest field reports say packer buyers this week are bidding $161 per cwt on a live basis against Wednesday’s Apr futures settlement of $155.60, and the Livestock Marketing Information Center is projecting that cash prices will remain significantly higher than futures for the time being.

At least part of that forecast could be because futures traders continue to expect more price pressure from weakening pork and chicken prices than the cash market is seeing.  This may be exacerbated after bird flu was diagnosed in Arkansas poultry Wednesday because it threatens US exports, and the rising US Dollar apparently is cutting into US exports on all levels.

The USDA’s boxed beef quotes were down Wednesday, with the choice cutout down $0.32 per cwt at $247.47 and the select cutout off $0.24 at $244.88.  The choice/select spread narrowed to $2.59, amid moderate volume of 111 loads of fabricated product sold into the spot market.

CME Feeder Cattle Index for the seven days ended Tuesday was $212.58 per cwt, up $0.58.