FEEDLOT COST OF GAIN DECLINING

Courtesy of Livestock Marketing Information Center

Cattle prices, both feeder and fed, have collapsed year-over-year. But, so have feedstuff costs, especially corn and hay. In the short-term, that has significant consequences for the cost of gain in feedlots. As reported by the monthly Kansas State University survey (Focus on Feedlots), the average steer cost of gain for March was $83.41 per cwt. Kansas feedlot projections for mid-April averaged $74.00, the lowest since August 2018. If grain and hay costs continue to slip, as expected, that number is headed even lower.

Since February, corn prices have been dropping counter seasonally. For the week ending May 8, USDA’s Agricultural Marketing Service reported that the Texas Triangle corn price was $3.33 per bushel ($5.95 per cwt.). The Omaha average was $2.97 per bushel. Those prices were the lowest since the last two weeks of November of 2016 (i.e., harvest). Compared to a year ago, corn price was down 48 cents per bushel (12%) and 53 cents per bushel (15%) in the Texas Triangle and Omaha, respectively.

The Livestock Marketing Information Center LMIC) calculates a monthly cattle feeding projected breakeven sale price using feedstuff costs when a 750-pound steer is put on-feed, assuming typical feeding conditions (including weather) in a commercial Southern Plains feedlot. Also, LMIC calculates adjusted monthly breakevens based on changes in feedstuff costs. This year, lower trending feedstuff costs have consistently pulled down the adjusted breakevens compared to the when placed calculation.

Using feedstuff costs fixed at the time of placement, a 750-pound steer sold in April had a breakeven sale price of $115 to $117 per cwt. The estimate for a steer to be sold in September and placed on-feed last month (April) was $97 to $98 per cwt. Of course, in addition to lower feedstuff costs, feeder cattle prices also have been declining.

Those looking at weak cattle prices need to recognize that cost of feedlot gain also has been dropping. As this summer unfolds, producers running summer stockers and even cow-calf operations may want to carefully evaluate retained ownership. Some pre-planning and attention to projected cost of gain may pay off.

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