Improved Outlook For Cattle Feeding Returns

January cattle feeding returns remained mired deep in red ink, but losses were dramatically less than in late 2015, and some now are projecting a profitable year for the most economically managed feedlots.

Calendar year 2014 was by most accounts the second best year ever for High Plains cattle feeders, while 2015 was by all accounts the worst.  This year may be somewhere in between as feeder cattle availability rises and prices go down.

Feedlot red ink easily declined by $200 a steer in January versus December, hinting at what might be in store for the year.

A study of USDA Agricultural Marketing Service data by the Livestock Marketing Information Center is telling some economists that cattle markets are setting-up in some important ways to be much different than a year ago.

USDA-AMS data shows that the weekly price difference between 700- to 800-pound feeder steers and fed cattle in the Southern Plains has declined since peaking at $82.42 per cwt the second week of June last year.  Importantly, feeder cattle prices have returned to much more normal levels relative to those of fed cattle, opening the pathway to limited profitability for some feedlots.

In the Southern Plains that market premium for last week was $23.96 per cwt, compared with $51.22 a year ago.

Last year, the extreme cost of feeder animals could not be overcome by comparatively inexpensive feedstuffs.

From a cattle feeder perspective, the cost of feeder cattle is very important.  The very high cost of cattle to go on feed and replace fed cattle marketed to packers was a major contributor to the slow marketing rate in 2015, which was a driver of the cattle price collapse last fall.

But in recent months, incentives to delay marketing of finished cattle with their associated problems of carcass size and meat production have dissipated significantly.

Using recent prices of 700-to 800-pound steers in the Southern Plains, the LMIC estimated breakeven sale prices for cattle to be sold in coming months are below $130 per cwt, the lowest since animals October 2014.  Based on these breakeven calculations, most fed animals to be sold in April and May are projected to turn a profit.

But even though feeding returns likely will improve dramatically, the lingering effects of 2015’s red ink are still expected to overhang the market and keep a cap on calf and yearling prices.




Cash cattle markets in the Plains Monday were quiet with no trading reported.  No packer bids were reported either.  Asking prices were expected to begin around $136 per cwt on a live basis.

Cattle in the Plains last week traded grudgingly $1 to $2 per cwt higher at $132 to mostly $134 on a live basis.  Dressed-basis prices were around $208 to $210, $2 to $4 higher.

The USDA reported higher wholesale beef prices Monday, with choice up $1.62 per cwt at $213.28, and select up $1.65 at $209.80.  The choice/select spread narrowed to $3.48 from $3.51, and there were 112 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Friday was $158.10 per cwt, down $0.48.  This compares with Mar’s Monday settlement of $155.17, down $0.70.