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Feedlot returns to improve notably

SweetyMommy/iStock/Getty Images cattle in livestock auction barn
Returns expected to be mostly positive for next nine months.

Beginning in September, the average economic returns to feedlot operators are expected to improve notably compared to recent months, according to according to the latest projections from Kansas State University economist Glynn Tonsor.

Currently, the net returns projected for closeouts in September are for a positive return of $20.56 per head for steers and $13.92 per head for heifers. This is a significant improvement over the net returns for closeouts in August, which are estimated at losses of $162.33 and $101.76 per head for steers and heifers, respectively. However, given the one-month lag in "Focus on Feedlots" survey information, Tonsor said market information realized animal performance data are not yet available.

The most recent “Focus on Feedlots” survey provided information on lots closed out in July 2020. Steers and heifers were estimated to be sold in July at losses of $283.57 and $246.07 per head, respectively.

feedlot returns sept 2020.png

Livestock Marketing Information Center agricultural economist Tyler Cozzens noted that southern Plains feeder cattle prices for 500-600 lb. cattle have seen some improvement recently. From January to August, prices averaged around $159/cwt. Interestingly, prices have recently strengthened to nearly $162/cwt., which he said is the highest monthly average since the coronavirus pandemic started in March.

Typically, prices decline from July to October, but Cozzens said 2020 hasn’t been a normal year. Due to COVID-19,  cattle production has been interrupted, and cattle flows have been disrupted, which has changed the flows, he explained.

It will be important to watch what happens during these placement months as well as with the drought and dryness that are affecting pasture and rangeland.

Regarding fed cattle, prices have retreated over the last several weeks. Prices are currently around the $102/cwt. range, which Cozzens said is a good sign.

To see a little strength, especially at this time of year, is good, “because we’re going into those months where fed prices can dip in September and October,” he said.

The Livestock Marketing Information Center is predicting the fourth-quarter five-area fed cattle price at $108-110/cwt., with an average of $107-109/cwt. for 2020.

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