Feedlot Margins Improve; Remain Negative

Feedlot margins improved significantly during the week ended Feb. 20 as prices for fed cattle rose nearly $2 per cwt, but the red ink continues to flow, said a well-known market analyst.  Packer margins declined with the higher prices, but they remain positive.

The Sterling Beef Profit Tracker from Sterling Marketing Inc., and published by AgWeb, placed average feedlot margins at a minus $223.97 a head, up $93.92, or 29.5%, from a minus $317.89 the previous week.  The latest week’s margin also was up $122.93 a head, or 35.4% from a minus $346.90 a month earlier.

However, the feedlot margin was down $118.88 a head, or 113.1%, from a minus $105.09 in the same week a year ago.

Sterling Marketing president John Nalivka calculated the cost of Oklahoma City 750- to 800-pound steers at $197.72 per cwt for the latest week’s feedlot margin calculations.  This was down $9.06, or 4.38%, from $206.78 the previous week and down $29.16, or 12.9%, from $226.88 a year ago.

Feed costs were up, though.  Sterling’s estimated feed costs were $306.68 a head, up $1.65, or 0.54%, from $305.03 a week earlier.  Feed costs also were up $27.40, or 9.81%, from $279.28 a year earlier.

The result was a decline in calculated total costs to $1,973.06 a head, down $71.43, or 3.49%, from $2,044.49 a week earlier and down $207.55, or 9.52%, from $2,180.61 a year earlier.




Because beef packers had to pay more for cattle in the latest week, their estimated margin was $16.82 a head, down $14.64, or 46.5%, from a week earlier and off $117.75, or 87.5%, from $134.57 a month earlier.

However, estimated packer margins were up $112.83, or 117.5%, from a minus $96.01 a year earlier.

Weekly wholesale beef prices declined in the latest week to $213.06 per cwt, according to USDA-AMS data, a dip of $3.94, or 1.82%, from $217.00 a week earlier.  Beef prices also were down $25.61, or 10.7%, from $238.67 a year earlier when packers were paying $159.04 per cwt for cattle and losing $96.01 a head.

For packers, the value of the hide and offal, or the drop credit as it is called, is a major source of profit or loss on the cattle they slaughter and process.  The calculated drop credit used for calculating the latest packer margins was $154.32 a head, up $1.92, or 1.26%, from $152.40 a week earlier, but down $45.01, or 22.6%, from $199.33 a year earlier.




But while feedlots have been losing big time for more than a year, the outlook shows signs of a possible break into black ink down the road.

Last week’s fed cattle prices rose about $3 per cwt to mostly $137, and most market analysts predict a continued rise in beef prices into early summer that may mean higher fed cattle prices as well.

The latest Profit Tracker calculated the average breakeven price for 750- to 800-pound feeder steers purchased through the Oklahoma City stockyards at $122.43 per cwt, well below the calculated breakeven of $154.32 used in the latest Profit Tracker.




Cash cattle markets Monday were quiet with no bids or offers reported.  Cattle last week traded at $134 to mostly $137 on a live basis, up about $3 from the previous week, and from $212 to $214 dressed, up about $4.

The USDA reported mixed wholesale beef prices Monday, with choice down $0.51 per cwt at $217.16, and select up $0.85 at $212.84.  The choice/select spread narrowed to $4.32 from $5.68, and there were 81 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Friday was $159.19 per cwt, up $1.01.  This compares with Mar’s Monday settlement of $158.15, down $0.50.