Uncharted territory. That’s where America’s cattle feeding industry finds itself as fed cattle lose $611 per head. Calculated breakeven prices on closeouts last week were $170.56 per cwt., according to Sterling Marketing, Vale, Ore. USDA’s reported 5-area cash price last week was $123.52 per cwt., or $47.04 short of breakeven.
“This unbalanced situation cannot be sustained in a market that will see 4% more beef, continued record pork production, and a likely 4% increase in chicken production during 2016,” says Sterling Marketing president John Nalivka. “Prices are aligning to a changed supply situation. Cattle weights will remain relatively high during 2016 with increased numbers as herds expand. While hog producer margins have turned red with significantly lower lean carcass values, this is not likely to cause a setback in continued herd expansion through most of 2016. Poultry production will increase, too. The result will be increased total meat supplies and lower prices and it will be noticeable for beef after 2 years of record prices, although prices are expected to generally remain above 2013 levels.”
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 $225.79 per cwt. The same steers factored into last week’s placements at $172 per cwt., or $461 per head less.
Beef packer margins increased $9 per head, resulting in average profits of $28 on every animal processed. Packer margins are about $1 per head better than last month.
A month ago cattle feeders were losing $486 per head, while a year ago profits were pegged at $45 per head, according to Sterling Marketing. Feeder cattle represent 79% of the cost of finishing a steer, compared to 78% last year.
A month ago beef packers were earning $27 for every animal processed, while a year ago packers were losing $78, Sterling Marketing estimates.
Farrow-to-finish pork producers lost $26 per hog last week, slightly better than the $30 per head loss the previous week, but slightly lower than the $20 per head loss found a month ago.
Pork packers saw their margins decline $2 to a profit of $27 per head. Negotiated prices for lean hogs were $54.66 per cwt. last week, an increase of $1.59 per cwt. from the previous week. Cash prices for fed cattle are $43.25 per cwt. lower than last year, and negotiated hog prices are $33.31 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 $295 per cow.