Profit Tracker: Losses Near $700

December 22, 2015 11:00 AM

The crisis continues for America’s cattle feeders. 2015 will go in the record books as the worst year in history for feedyards. And it’s not even close. Last week’s closeouts tacked on an additional $14 per head in losses, leaving margins $695 in the red, according to Sterling Marketing, Vale, Ore. For perspective, that means America’s cattle feeding industry lost more than $400 million last week.

USDA’s reported 5-area cash price last week was $116.81 per cwt., $2 per cwt. lower than the week before and $53.46 per cwt. short of breakeven.

The ongoing market wreck has pulled feeder cattle prices significantly lower. Oklahoma City feeder steer prices factored into Sterling Marketing’s sample closeout against last week’s fed cattle was $225.29 per cwt. The same steers factored into last week’s placements at $147.15 per cwt., or $606 per head less.

Beef packer margins declined nearly $1 per head, resulting in average profits of $68 on every animal processed. Packer margins are about $46 per head better than last month.

A month ago cattle feeders were losing $542 per head, while a year ago losses were pegged at $25 per head, according to Sterling Marketing. Feeder cattle represent 78% of the cost of finishing a steer.

A month ago beef packers were earning $22 for every animal processed, while a year ago packers were losing $61, Sterling Marketing estimates.

Farrow-to-finish pork producers lost $25 per hog last week, about the same as losses the previous week,  but $7 per head better than the $32 per head loss found a month ago.

Pork packers saw their margins increase $5 to a profit of $34 per head. Negotiated prices for lean hogs were $51.56 per cwt. last week, a decline of $2.36 per cwt. from the previous week. Cash prices for fed cattle are $42 per cwt. lower than last year, and negotiated hog prices are $29 per cwt. lower than last year.

Nalivka projects average cash profit margins for cow-calf producers at $490 per cow this year. Last year’s estimated average cow-calf margins were $526 per cow. Cow-calf profits for 2016 are projected at $232 per cow.

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Spell Check

Columbus, OH
12/22/2015 06:45 PM

  Painful!! Having fed cattle off and on over the past 20 years this is an industry that takes enormous risk , displays little financial discipline and seemingly ignores markets available to manage risk . As an investor feeder cattle are still overpriced not offering hedge able opportunities even after record losses for 2015 with enormous losses likely to continue into the 1st quarter of 2016. To entice new investors to take the risk of physically placing cattle on feed a reasonable profit (50-70dollars per head) needs to exist . 500-700 dollar per head losses need not occur if cattle are placed in feed lots and at a minimum put options can be purchased to provide close to break even from day 1. When cattle are placed at day 1 with 100-150 dollar per head losses , risk management is difficult if not impossible to implement contributing to the catastrophe that currently exists. While sympathetic to the hardship current events no doubt have caused, let's hope discipline when it comes to purchasing feeder cattle is adhered to going forward and losses currently witnessed today are Bourne by speculators , not the cattle feeding industry . The only thing we can control is the purchase price , don't be afraid to say no.


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