Feedlot Margins Positive; Outlook Iffy

Last week’s feedlot margins were in the black for the second straight week after more than a year of losses, according to the Sterling Beef Profit Tracker, but a trend toward declining fed cattle prices may hinder positive margins in coming months.

The weekly profit tracker, published by AgWeb, shows feedlots making $150.70 a head on cattle sold last week.  This is down $75.35, or 33.3%, from $226.05 a week earlier but up from a minus $74.64 a month earlier and a minus $16.21 a year earlier.

Last week, fed cattle brought $125 to $125.50 per cwt on a live basis in parts of the Central and Northern Plains.  This was down about $6 from a range of $129 to $132 the previous week.

To arrive at the calculated positive feedlot margin, John Nalivka, president of Sterling Marketing Inc., and author of the profit tracker, used the USDA’s five-area direct cattle price of $124.82 per cwt.  He also factored in an Oklahoma City feeder cattle price of $147.00 for 750- to 800-pound feeder cattle and a feed cost of $324.82 a head.

That brought the total cost for last week’s cattle sold to packer buyers to $1,586.06 a head and a breakeven sale price of $113.94 per cwt, which yielded the profit against the sale price of $124.82.

For the year to date, however, the calculated margin for feedlots was a minus $31.00 a head, compared with a minus $239.36 a year ago and a plus $191.45 in 2014 and a minus $51.83 in 2013.




But the outlook for fed cattle prices and feedlot profitability shows some concerns.  While the 2010-2014 average shows a steady build from here on through November, last year’s price trends likely provide a more realistic view.

Because of rising cattle numbers, fed steer prices generally declined last year with some bumps associated with holiday demand.

The previous five-year average, on the other hand, is based on the last years of an extended decline in US cattle populations.  A five-year average line may not be the best comparison in this case since it only shows a correlation between declining supplies and rising prices – a far different scenario than the current markets with rising supplies and declining prices.

The USDA-Agricultural Marketing Service fed cattle price index for the Southern Plains from 2005 through 2014 may give a better view of monthly price trends.  It shows a summer dip followed by a fall rise above 1 on the index and no clear shot at higher prices, even when supplies were declining.




Cash cattle markets Tuesday were quiet as participants watched futures prices climb amid thoughts aggressive feedlot sales in previous weeks were catching sellers up with their marketings.  However, sales last week were thin, especially in Texas, leaving feedlot showlists generally larger, especially in Texas.

Cash markets last week were $6 per cwt lower at $125 to $125.50.  A few trades were reported in dressed markets at $204, steady to $2 lower.

The USDA’s choice cutout Tuesday was $0.73 per cwt lower at $221.34 per cwt, while select was off $0.20 at $201.37.  The choice/select spread narrowed to $19.97 from $20.50 with 98 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $143.75 per cwt, up $1.73.  This compares with the Aug settlement Tuesday of $147.10, up $0.40.