Feedlot, Packer Margins Positive Last Week 2-27-20 – Unhedged feedlots and beef packers were left last week with modest profits, according to the Sterling Beef Profit Tracker from Sterling Marketing in Vale, Ore., published by Drovers. Average cash cattle prices rose last week, boosting feedlot margins while allowing calculated packer margins to inch higher from the previous week, the Profit Tracker showed. FEEDING MARGINS CLIMB Calculated feedlot margins for last week were averaged out at $161.70 per cwt on a live basis, up $1.89, or 1.18%, from $159.81 a week earlier. However, the latest figure was down $47.99, or 22.9%, from $209.69 a month earlier but $16.84, or 11.6%, more than the year-earlier margin of $144.86. To reach those calculated margins, John Nalivka, owner of Sterling Marketing and author of the Profit Tracker, used the USDA’s weekly five-area direct price per cwt. This price came in at $119.66 per cwt last week, $118.83 the previous week, $124.49 a month earlier and $125.97 for the same week a year earlier. For the estimated average cost of the feeder cattle that became last week’s marketed fed cattle, Nalivka used the Oklahoma City price for 750- to 800-pound feeder steers. This came to $134.61 per cwt for the fed cattle sold to packers last week, $134.48 for those sold the previous week, $135.87 for those marketed a month earlier and $150.40 for those sold in the same week a year ago. Feed costs for the cattle sold for slaughter last week were estimated at $279.24 a head, compared with $271.02 for those sold a week earlier, $286.69 for those sold a month earlier and $256.44 for those sold in the same week a year ago. All of that brought about a calculated breakeven price of $107.77 per cwt for those cattle exiting the feedlot for the packing plant last week. This was a little more than the $107.08 of the previous week but down from the $109.07 of a month earlier and less than the $115.32 of a year earlier. BREAKEVEN UP FOR NEXT ROUND The calculated breakeven price for 750- to 800-pound feeder steers entering the feedlot last week went up, according to the Profit Tracker. The new breakeven price for these calves came in at $110.93 per cwt. To get that breakeven estimate, Nalivka used a weekly Oklahoma City auction price of $139.98 per cwt. This was up from $135.12 the previous week but down from $143.84 a month earlier. Still it was more than the $137.92 figure used for the same week a year earlier. The estimated feed cost to bring the steers entering the feedlot last week to maturity was $R281.26 a head, down from $284.82 for those entering a week earlier but down from $290.72 for steer placements in the same week a month earlier. However, it was less than the $286.84 a year earlier. CATTLE, BEEF RECAP Cash cattle traded this week at $115 to $119 per cwt on a live basis, down $1 to $4 from last week and at $186 to $187 on a dressed basis, down $3. The USDA choice cutout Wednesday was down $1.13 per cwt at $206.34, while select was down $1.30 at $198.60. The choice/select spread widened to $7.74 from $7.57 with 131 loads of fabricated product sold into the spot market. No futures contracts were tendered for delivery Wednesday against the Feb futures contract. The CME Feeder Cattle index for the seven days ended Tuesday was $139.61 per cwt, down $0.11 from the previous day. This compares with Wednesday’s Mar contract settlement of $134.07, up $1.10. IN OUR OPINION –The severe drop in the stock markets does not augur well for beef prices. If consumers get scared of the economy, one of the first areas they will cut in the US is good eating-quality food. They may not stop eating it all together but they may cut back on portion sizes, and they may waste less, meaning in total they will buy less and pressure prices. –It could be a good year for hog producers. The USDA is projecting higher production and higher prices because of increased exports. –The Coronavirus looks like it will spread around the world quickly. It’s getting harder to trace the contacts people had with infected people, and world travel means infected people are moving around. This partly is because an infected person is contagious before showing symptoms of the illness. It’s a tough one to halt. –Anecdotal evidence shows that the Coronavirus’ spread is causing more people to get a flu shot.

Lester Aldrich

Unhedged feedlots and beef packers were left last week with modest profits, according to the Sterling Beef Profit Tracker from Sterling Marketing in Vale, Ore., published by Drovers.

Average cash cattle prices rose last week, boosting feedlot margins while allowing calculated packer margins to inch higher from the previous week, the Profit Tracker showed.

 

FEEDING MARGINS CLIMB

 

Calculated feedlot margins for last week were averaged out at $161.70 per cwt on a live basis, up $1.89, or 1.18%, from $159.81 a week earlier.  However, the latest figure was down $47.99, or 22.9%, from $209.69 a month earlier but $16.84, or 11.6%, more than the year-earlier margin of $144.86.

To reach those calculated margins, John Nalivka, owner of Sterling Marketing and author of the Profit Tracker, used the USDA’s weekly five-area direct price per cwt.  This price came in at $119.66 per cwt last week, $118.83 the previous week, $124.49 a month earlier and $125.97 for the same week a year earlier.

For the estimated average cost of the feeder cattle that became last week’s marketed fed cattle, Nalivka used the Oklahoma City price for 750- to 800-pound feeder steers.  This came to $134.61 per cwt for the fed cattle sold to packers last week, $134.48 for those sold the previous week, $135.87 for those marketed a month earlier and $150.40 for those sold in the same week a year ago.

Feed costs for the cattle sold for slaughter last week were estimated at $279.24 a head, compared with $271.02 for those sold a week earlier, $286.69 for those sold a month earlier and $256.44 for those sold in the same week a year ago.

All of that brought about a calculated breakeven price of $107.77 per cwt for those cattle exiting the feedlot for the packing plant last week.  This was a little more than the $107.08 of the previous week but down from the $109.07 of a month earlier and less than the $115.32 of a year earlier.

 

BREAKEVEN UP FOR NEXT ROUND

 

The calculated breakeven price for 750- to 800-pound feeder steers entering the feedlot last week went up, according to the Profit Tracker.  The new breakeven price for these calves came in at $110.93 per cwt.

To get that breakeven estimate, Nalivka used a weekly Oklahoma City auction price of $139.98 per cwt.  This was up from $135.12 the previous week but down from $143.84 a month earlier.  Still it was more than the $137.92 figure used for the same week a year earlier.

The estimated feed cost to bring the steers entering the feedlot last week to maturity was $R281.26 a head, down from $284.82 for those entering a week earlier but down from $290.72 for steer placements in the same week a month earlier.  However, it was less than the $286.84 a year earlier.

 

CATTLE, BEEF RECAP

 

Cash cattle traded this week at $115 to $119 per cwt on a live basis, down $1 to $4 from last week and at $186 to $187 on a dressed basis, down $3.

The USDA choice cutout Wednesday was down $1.13 per cwt at $206.34, while select was down $1.30 at $198.60.  The choice/select spread widened to $7.74 from $7.57 with 131 loads of fabricated product sold into the spot market.

No futures contracts were tendered for delivery Wednesday against the Feb futures contract.

The CME Feeder Cattle index for the seven days ended Tuesday was $139.61 per cwt, down $0.11 from the previous day.  This compares with Wednesday’s Mar contract settlement of $134.07, up $1.10.