Monthly beef packer breakeven fed steer costs were expected to bounce around for the next few months with support seen at $122.40 per cwt on a live basis and resistance at $130.51. This week’s cash price is settling out around $120.
The estimated breakeven price for packer steer purchases was calculated by the Livestock Marketing Information Center using USDA-Agricultural Marketing Service and USDA-National Agricultural Statistics Service data.
From August through November, packers made money on the slaughter-ready steers they purchase from the feedlots, the LMIC said.
However, that cannot be expected to continue for the next few months. Profitable packer margins might continue through December, but fed steer prices are rising, and the profits could evaporate quickly.
Current LMIC estimates for monthly packer fed steer breakeven costs show November’s base of $126.06 per cwt falling to $122.41 in December but rising to $127.38 in January, $123.62 in February and $130.51 in April. Estimated breakeven steer costs were not calculated farther out than April, and they likely will change over time, but they do provide an interesting look at an educated guess about future profitability prospects.
FEEDLOTS ALSO FEELING THE LOVE
Sterling Marketing Inc.’s weekly Beef Profit Tracker said feedlots were thought to be making an average of $99.08 a head on fed cattle purchased last week, up from $77.26 a week earlier and $89.91 a month earlier. A year ago, packers were thought to be making $38.78 a head.
That profitability was thought to be keeping a floor under feeder cattle cash prices as feedlot returns keep them coming to the auction barns and reputation breeders for replacement stock.
The Sterling Profit Tracker said last week’s USDA five-area cash cattle price of $119.80 per cwt on a live basis was above the calculated breakeven price of $112.65. For calves purchased last week, the breakeven price will be around $112.06 per cwt.
FEEDLOTS SEE LESS OF RETAIL DOLLAR
But while most feedlots are thought to be turning a profit, they are getting less of the retail dollar, the LMIC said. Using AMS and USDA-Economic Research Service data, the LMIC calculated that feeders in November received $1,379.16 per 1,000 pounds, down from $1,447.69 in October and below last year’s $1,502.80.
However, feedlots continue to receive significantly more of the retail dollar than the 2011-2015 average of $1,178.09, the LMIC said.
The live-to-retail price spread declined late in the year last year and this year, but the five-year average has it making minor late-year gains. Since most of the late-year retail and restaurant buying is thought to be done, one analyst said there is little reason to believe the spread will jump this December.
CATTLE, BEEF RECAP
Two lots of fed cattle sold Wednesday on the Livestock Exchange video auction at $120 per cwt, up $4 from last week’s thinly tested market.
Cash cattle trade then took place at $120 per cwt on a live basis in the Plains, steady to up $1 from the bulk of last week’s action. Dressed-basis sales were reported at $190 to $191 per cwt, up $2 to $3.
The USDA’s choice cutout Wednesday was down $3.67 per cwt at $198.09, while select was up $1.17 at $185.49. The choice/select spread narrowed to $12.60 from $17.44 with 137 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday was $152.47 per cwt, down $0.03. This compares with Wednesday’s Jan settlement at $141.77 per cwt, down $3.42.