Summer Cattle Feeding a Tough Market

Despite unusually strong fed cattle prices, higher feeder cattle prices combined with higher feed costs kept most closeouts in the red this summer.  However, by late summer, feedgrain prices moderated in response to a larger corn crop, which provided some relief for feeders in August and September.  Feeders jumped into the black after being in the red since February.

The recent run-up in feedgrain prices along with strong feeder cattle prices suggests red ink will return for the last few months of 2006 and into 2007.

Since February, cattle feeders on average have lost money on most closeouts with the largest losses occurring in the second quarter.  Based on a 750-pound steer placed in a Southern Plains commercial feedlot and taking all production costs into account, feeders lost an average $128 per steer in the second quarter.

Returns improved some in the third quarter with losses averaging about $13 per steer.  By August, feeders averaged about a $7 per steer return on steer closeouts.  During September feeders averaged about $26 per steer.

Estimated break-evens for a 750-pound steer placed into a Southern Plains feedlot to be sold in October will be about $94 per cwt., much higher than forecasted fed cattle prices late in the year and in early 2007.  In coming months break evens will move higher.  The estimated monthly break even for a 750-pound steer that will reach slaughter weight in January 2007 is just over $98 per cwt.

Source:  Livestock Marketing Information Center