'Red Ink' Will Continue For Feedlots For Remainder Of 2015, Tonsor Says

Every cattle operation has its own breakeven. The amount of money you’re making or not making, as the case may be. Depends on how old of a pickup you may be driving, the amount of infrastructure that you have on your operation. Right now, cow-calf operators are in the black. They have made a lot of money, including record breaking amounts in 2014. That profitability continues this year based on prices being paid for calves. 

 

Meanwhile, feedlots are experiencing a different story. Some are making money, but the average feed yard is in the red. Kansas State University Extension Livestock Market Economist Dr. Glynn Tonsor figures feedlot returns, break evens and close-outs on feedlot cattle on an ongoing basis. The current numbers show a lot of red ink. In every month except August, there are projected losses ahead. He said August has a projected return of $35, but for the rest of the months between now and February 2016 there are negative returns for feedlots.

 

“Underneath this, the main reason that there are projected losses is that, at the moment, project fed cattle prices are in the low $150’s, maybe even mid-$150’s, depending on the close-out month and the break evens needed are usually in the mid-$160’s and actually a couple cases of breaking $170,” Tonsor said. 

 

That gap between making or losing money comes down to input costs. Tonsor said feedlots are still paying too much for feeder cattle, relative to the cost of gain. The cost of gain is going up over this time period, but the larger factor remains to be the variability of the price of feeder cattle. He said the June close-outs are being projected at a loss of $117 per steer with $220 cwt being paid for feeder cattle and fed cattle prices are at under $154 cwt.

 

In looking at the numbers for the rest of the year, Tonsor said there isn’t much difference in the prices feedlots will receive for selling cattle to processing plants. He said rather it’s the price for yearlings coming into the feedlot that make all the difference. In looking at the typical cash strategy, Tonsor said feedlots are still paying too much for fed cattle relative to the margin being projected with cost of gain and fed cattle values.