Unhedged feedlots lost money again in December, the fifth straight month of losses, according to USDA data compiled by the Livestock Marketing Information Center.
And unless cattle prices go up, the situation may not change in January. The next four months of 2018 also appear to be a time of struggle for cattle feeders.
The LMIC got its data from the USDA’s Agricultural Marketing Service and the National Agricultural Statistics Service.
Monthly estimated breakeven cost data compared with average choice steer prices shows that cattle prices dipped below the total cost it took to get them to slaughter weight and finish in August. The difference between costs and prices received was the most harsh on feeders in October, with feedlots receiving $11.61 per cwt less than the cost of production.
That followed a seven-month period of positive returns for cattle feeders in 2017. Feedlots got their largest positive returns last year in May when they received $23.72 per cwt more than it cost to produce the cattle for slaughter.
LESS CHOICE PRODUCED
The disparity may have played a part in cattle feeders’ decisions to pay less attention to feeding cattle to their maximum genetic potential to produce a choice or prime-graded carcass – it just didn’t pay any more.
That’s not to say, packers weren’t paying premiums for prime carcasses and discounting for select or lower. They were, but with losses mounting, there was less incentive to pump extra feed into them to get a few more choice or prime carcasses.
USDA/AMS data show the decline in the amount of choice-grading carcasses as a percentage of total slaughter through December.
Only in the later weeks of December did the percentage rise above 2016 levels. However, the percentage gain wasn’t large and could be just an anomaly.
TREND NOT EXTINGUISHED
Despite the late-year dip in the percentage of choice-grading cattle produced, the trend toward cattle with more internal muscle fat, called marbling, is not over, a market analyst said.
Total weekly cattle slaughter remained above year-earlier and five-year averages through December, and despite the percentages of choice carcasses being lower, the actual number of choice and prime carcasses apparently was enough to satisfy advance meat bookings at the packers.
Heifer slaughter was especially noteworthy, with 178,234 head being slaughtered in the third week of December, up 27,334, or 18.1%, from 150,900 in the same week a year earlier and up 22,854, or 14.7%, from the 2011-2015 average of 155,380.
Steer slaughter was less impressive, with 305,690 head going under the knife in the third week of December, down 3,910 head, or 1.26%, from 309,600 a year earlier but up 25,330, or 9.03%, from the previous five-year average of 280,360.
The upshot is that packers still need quality carcasses. Domestic consumers and export buyers have learned that a little beef fat really helps the flavor and the total eating experience.
CATTLE, BEEF RECAP
Cash cattle traded Monday through Tuesday at $119.50 to $121 per cwt on a live basis, mostly $120, down $1.50 to $2 from last week. Dressed-basis trade took place at $192, down $3.
Fed cattle then sold Wednesday on the Livestock Exchange video auction at $119.
The USDA’s choice cutout Wednesday was down $0.43 per cwt at $210.06, while select was off $0.46 at $203.23. The choice/select spread widened to $6.83 from $6.80 with 98 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Tuesday was $151.57 per cwt, down $0.85. This compares with Wednesday’s Jan settlement of $144.37, down $1.10.