Purdue University agricultural economist Michael Langemeier recently explored the outlook for cattle finishing returns in 2019, which is highly dependent on crop and forage prices. Upcoming acreage decisions will have important ramifications on crop and forage prices, which will, in turn, affect the feeding cost of gain and net returns, he said.
According to Langemeier, each 10-cent increase in the corn price results in a decrease in the feeding cost of gain of approximately 87 cents/cwt. and a decrease in net returns of approximately $3.20 per head. Each $10 increase in alfalfa prices results in a $1.10/cwt. decrease in the feeding cost of gain and a decrease of $4.05 per head in net returns.
Monthly cattle finishing net returns averaged $111 per head in 2017 and dropped to a loss of $45 per head in 2018. After falling below $75/cwt. in May 2018, the cattle feeding cost of gain increased to $80.31 in December 2018. Langemeier relayed that prices in the first four months of 2019 are expected to range from $124 to $127/cwt. Breakeven prices for the rest of the year are expected to range from $117 to $121/cwt.
Langemeier said current fed cattle price projections suggest that breakeven prices during the first half of 2019 will result in average losses of approximately $25 per head. For the second half of 2019, average losses are expected to exceed $25 per head in the third quarter, while net returns in the fourth quarter are expected to be closer to breakeven.