Cattle feeding margins are headed lower as packer margins are working higher, and market analysts are blaming the rising cost of corn for squeezing feedlot costs.
Drovers reported that the Sterling Profit Tracker estimated that cash fed cattle prices held near steady at about $115.40 per cwt last week, but average cattle feeding margins dipped $41 a head to $27.85 each.
At the same time, packers had their estimated margins rise about $33 a head to $235.71, the Profit Tracker said.
Drovers did not include a link to the Profit Tracker, but the author, John Nalivka, president of Sterling Marketing, graciously supplied a spreadsheet for this article. The Profit Tracker estimates returns based on unhedged fed cattle with no adjustments for items like health costs.
FEEDING MARGINS SLIPPING
Two weeks ago, feedlots had an estimated positive margin of $69.45 a head on cattle sold to the packers, so last week’s lower price represented a drop of $41.60 a head, or 59.9%. A month ago, the margin was $117.64 a head, making the decline to last week amount to $89.79, or 76.3%. In the same week a year ago, feedlots lost an estimated $77.55 a head.
Profit Tracker calculations used a price of $142.83 per cwt for 750- to 800-pound feeder steers from the Oklahoma City auction. For fed cattle sold two weeks ago, a price of $138.41 was used. This was well below the $147.15 feeder steer cost of fed cattle sold for slaughter a month ago and well below the $149.87 initial cost of fed cattle sold for slaughter a year ago.
For 759- to 800-pound feeder steers placed on feed last week, the Profit Tracker used a reported price from Oklahoma City of $138.00 per cwt. This was up from $137.69 a week earlier but down from $141.94 a month earlier. A year ago, the feeder steer price was reported at $136.82.
Nalivka made a special note in this week’s Profit Tracker pointing out the higher feed costs for fed cattle with rising corn prices.
The estimated feed cost for cattle sold to packers last week was $288.39 a head, up $7.29, or 2.59%, from $281.10 for cattle sold for slaughter a week earlier and up $18.30, or 6.78%, from $270.09 for those sold a month earlier. A year ago, feed costs were estimated at $271.95 a head.
Estimated feed costs for cattle placed on feed last week came to $309.18 a head, up $20.32, or 7.03%, from $288.86 just a week earlier and up $31.80, or 11.5%, from $277.38 for the calves placed a month earlier. Calves placed on feed a year ago had an estimated feed bill of $290.25 each.
PACKER MARGINS UP
Estimated packer margins for cattle purchased last week came to $235.71 a head, compared with $203.55 a week earlier and $168.21 a month earlier. Although a year ago, packer margins came to $348.58 a head.
CATTLE, BEEF RECAP
Cash cattle trading was reported in the Plains this week at $112 to $115 per cwt on a live basis, down $3 from last week. No dressed-basis trade was reported but took place last week at $186 per cwt, steady to up $1.
The USDA choice cutout Wednesday was down $0.89 per cwt at $222.11, while select was off $0.03 at $207.18. The choice/select spread narrowed to $14.93 from $15.79 with 118 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday was $131.88 per cwt, down $0.31 from the previous day. This compares with Wednesday’s Aug contract settlement of $139.45, up $2.00.