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Red ink likely for cattle feeders this summer

August live cattle futures currently well below breakeven estimated for that time frame.

There have been significant declines in cattle prices since late February, and the future looks pretty grim as the U.S. now faces the spread of coronavirus and the subsequent impacts. Looking ahead, the Livestock Marketing Information Center (LMIC), which has been estimating monthly cattle feeding returns since the mid-1970s, said red ink is likely for cattle sold this summer.

Those estimates, LMIC noted, assume feeding out a 750 lb. steer in a commercial southern Plains feedlot and include all costs of production. They are not survey based and presume normal weather conditions. Cash prices for fed cattle prices and feedstuffs are used in determining the estimates.

According to LMIC, estimated cattle feeding returns tend to be quite variable, and this year, it looks like it will be much the same.

“In 2019, those monthly returns averaged about $9.50 per steer, ranging from $180.92 for an animal sold in December down to -$152.85 for September," LMIC said. "Over the prior five years (2014-18), the annual average was about $23.00 per steer. The 10-year per animal average was about -$7.00.”

LMIC relayed that February’s estimated closeout profitability, on average, was not as good as had been expected earlier in the year and came in below January’s closeout. For steers sold during January, LMIC estimated profitability at $150.00-151.00 per head. Just over a month ago, LMIC had projected that February’s number would come around $136.00-140.00 per steer. If the cattle were not hedged, LMIC said that projection “turned out to be optimistic.”

“Between the first full week of February and the last week of the month, Kansas fed steer prices fell by nearly $6.00/cwt. or, for a 1,350 lb. steer, by $81.00 per animal. LMIC put the final February profit at about $86.00 per steer,” the center said.

Hedged animals will return excellent profits through June sale dates, LMIC noted, but, for steers (750 lb.) placed on feed in February, which will have a sale date of August, LMIC said the breakeven price based on current feedstuff costs is $109.00-111.00/cwt.

“That’s well above what the live cattle futures are offering,” LMIC noted.

August live cattle futures closed at $89.575/cwt. on March 17, a sharp decline from $110.15/cwt. on Feb. 3.

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