Feedyard margins slip below breakeven again, packer losses continue

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Cash fed cattle prices moved $1 to $2 higher last week at $121 to $122 per hundredweight, but cattle feeding profits declined more than $30 per head. Packer margins improved only slightly for the week, and losses continue in excess of $60 per head, according to the Sterling Beef Profit Tracker. The Sterling Profit Quotient lost 90 points for the week, according to estimates developed by Sterling Marketing Inc., Vale, Ore.

The cattle markets rallied last week but traders continue emphasize higher feed costs and higher feeder replacement costs will make cattle feeding profits hard to materialize. November is projected to bring increasing supplies of cattle to market, though the increase is not expected to be burdensome. Analysts continue to project market prices around the $120 level in the coming weeks.

Feed continues to account for more than 29 percent of total feeding costs, while closeouts at the same time last year show feed cost at just 19 percent of total feeding costs.

For comparison, last week’s closeouts saw average cash prices at $120.47 per hundredweight, while last year’s cash prices were at $102 per hundredweight. One year ago feedyards were reporting average profits of $113.10 per head.

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 October 22:

  • Average feedyard margins: -$8.86 per head.
  • Average packer margins:  -$63.46 per head.
  • Sterling Profit Quotient: -43.1.

“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 produced by Sterling Marketing Inc. and John Nalivka, president, Vale, Ore., and is published weekly by Drovers/CattleNetwork.



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