Feedyard closeouts now written in red, packers in black

Cattle feeding margins slipped into negative territory last week for the first time this year. Margins declined more than $75 per head for the week as cash cattle prices dropped another $5 per hundredweight. Profit margins were more than $230 per head just one month ago. Packer margins improved more than $47 per head for the week, jumping from a $26 per head loss to a $20 per head profit. Last week was the first time in five weeks that packers turned a profit on processed cattle. The Sterling Profit Quotient fell 215 points for the week, leaving the SPQ in negative territory for the first time this year, according to estimates developed by Sterling Marketing Inc., Vale, Ore.

Soft demand for beef the past few weeks has contributed to a weaker market. The market is likely to see several more weeks of soft demand due to reduced consumer spending power as a result of higher fuel and transportation costs. Feedyards also report an increasing number of cattle on feed, which will lead to an increase in beef production during the last half of 2011.

 “Estimates for feedlot feed costs, breakeven prices, and margins are generated based on the cost of a 775- pound feeder steer, and corn prices (Western Kansas) during the week the cattle were placed on feed,” says John Nalivka, Sterling Marketing president.

“The days on feed for those animals and closeout week are then calculated using average data that might be expected for feeding performance, i.e. feed conversion and ADG. Breakevens and margins will vary according to differences in the cost of cattle, cost of feed, and feeding performance,” Nalivka says.

The Sterling Beef Profit Tracker is calculated using actual weekly prices for Choice fed steers, feeder steers, feed costs, boxed beef-cutout prices, hide and offal values, and other factors that influence profit margins.

The Sterling Beef Profit Tracker for the week ending May 21:

• Average feedyard margins: -$6.67 per head.
• Average packer margins: $20.83 per head.
• Sterling Profit Quotient: -11.7.

The Sterling Beef Profit Tracker is produced by Sterling Marketing Inc. and John Nalivka, president, Vale, Ore., and is published weekly by Drovers/CattleNetwork.