Sterling: Feedlot Margins Down; Packer Margins Up

Feedlot margins faded deeper into the red last week as fed cattle prices dipped.  At the same time, packer margins were calculated to have risen for the same reason.

The Sterling Beef Profit Tracker by John Nalivka, president of Sterling Marketing Inc., and published by AgWeb, had feedlot margins for unhedged cattle sold last week at a minus $69.81 a head, off $28.49, or 68.9%, from a minus $41.32 a week earlier.

 

THE BREAKDOWN

 

While bad for feedlots, last week’s losses were $50.21 a head, or $250.8%, better than the minus $120.02 losses experienced just a month ago.  And they paled in comparison to the $480.02-per-head losses of a year ago.

For the calculations, Nalivka used the USDA’s five-area direct price of $102.78 per cwt, which was down $3.79, or 3.56%, from $106.57 the previous week and off $6.87, or 6.27%, from $109.65 a month ago.  Fed cattle prices in the same week a year earlier, at $117.79 per cwt, were $15.01 per cwt higher than last week’s $102.78, but feeder cattle and corn prices were much higher then.

Feeder cattle prices are declining, helping the bottom line for feedlots.  For last week’s feedlot margin calculations, prices for 750- to 800-pound feeder steers at the Oklahoma City auction were $142.04 per cwt, down $2.87, or 1.98%, from $144.91 a week earlier.

Oklahoma City feeder cattle prices for cattle sold to packers for slaughter a month ago were $155.38 per cwt, the Profit Tracker said, and for those sold in the same week a year ago were $213.49.

Feed costs for cattle sold to packer buyers last week were $280.60 a head.  This was down $0.82 a head, or 0.29%, from $281.42 a week earlier.  Feed costs for cattle sold last week also were down $37.29, or 11.7%, from $317.89 a month earlier and were off $41.08, or 12.8%, from $321.68 in the same week a year ago.

 

OUTLOOK BETTER, STILL NOT GOOD

 

The outlook for cattle feeders looks a little better but still leaves room for improvement.  The Sterling Profit Tracker’s calculated breakeven price for unhedged feeder cattle placed on feed last week was $97.63 per cwt.

That was $10.19 per cwt, or 9.45%, less than the $107.82 that feedlots needed to break even last week.  It also was down from the $102.29 needed for cattle placed the previous week and the $102.22 breakeven for those placed a month ago.

 

PACKER MARGINS SEEN VERY WIDE

 

But while feedlot margins suffer, packer margins are widening.  Sterling calculations showed last week’s packer margins a plus $182.51 a head, up $59.94, or 48.9%, from $122.57 a week earlier.

That was even $48.23 a head, or 35.9%, more than the plus $134.28 margins calculated for a month earlier and up $84.83, or 86.8% from the plus $97.68 packer margins of a year ago.

Most of that came on lower fed cattle prices.  Beef prices are up a little from last week but are down from a month ago and a year ago.

 

CASH CATTLE MARKETS QUIET

 

Cash cattle markets were quiet with offers at $104 to $105 per cwt on a live basis and mostly $160 dressed.  Cattle traded last week at mostly $102 live and $158 to $160 dressed.

The USDA’s choice cutout Tuesday was $0.82 per cwt lower at $183.18, while select was off $2.11 at $172.75.  The choice/select spread widened to $10.43 from $9.14 with 123 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $127.33 per cwt, up $0.38.  This compares with the Oct settlement Tuesday of $124.12, down $0.52.