From the September 2016 issue of Drovers.

This year’s calf and yearling prices are well short of 2015. Every semi-load of calves are worth roughly $30,000 less than at the same time last year. Does that suggest there is an opportunity for producers to retain ownership?

Using Sterling Marketing’s forecasts for feeder cattle prices and the resulting break-even price for fed cattle, the Retained Ownership Opportunity Tracker provides a first gauge for ranchers to begin their market evaluation.

During August, feeder cattle (750 lb. to 800 lb.) averaged $146.75 per cwt with an estimated breakeven for those cattle when marketed during January of $111.14 per cwt. During September, Sterling’s projected feeder cattle price is $140 per cwt with an estimated break-even price of $105.28 cwt using the Sterling Feeding Model. With sharply lower feed costs, projected break-even prices continue to decline with projected closeouts for those cattle during the first quarter of 2017.

Using the Sterling Feeding Model, our projected cost of gain ranges close to $60 compared to $70 in 2015. That year-
earlier cost of gain figure coupled with feeder cattle prices averaging $212.80 per cwt, made a breakeven on cattle marketed in January 2016 at $152.79. The five-area negotiated Choice steer price that month was $134.39, leaving an estimated feeding loss of -$256.72 per head.

This year, the September Retained Ownership Opportunity Index shows favorable profit conditions. Our forecasts for the five-area negotiated price is in the $115 range for the first quarter.

While that projection implies a comfortable margin might exist for producers retaining those cattle, we continue to stress the importance of taking into consideration all the risk factors. While projected break-even prices have fallen significantly over the past 60 days, it is still the key risk consideration in the decision to retain ownership.

John Nalivka, is the president of Sterling Marketing, Inc., Vale, Ore., and provides the weekly Sterling Beef Profit Tracker on www.Drovers.com. You can contact him at  jnalivka@fmtc.com.