Released: January 28, 2002

Cattle Returns Improving, But Still Negative

MANHATTAN, Kan. – Cattle feeders continued to lose money early into the new year, but losses should shrink over the next few months.

"Current estimates suggest that cattle feeders lost around $150 per head on December closeouts, and losses in early January likely averaged in the $130- to $140-per-head range," said Kansas State University agricultural economist Rodney Jones.

Supplies of market-ready cattle and beef are expected to tighten this spring, which should lead to higher slaughter cattle prices and improving cattle-feeding returns. Returns will continue in "negative territory" for the next several months, however, the economist said.

Slaughter cattle prices at Western Kansas feedlots climbed $4 to $5 per hundredweight [cwt] from mid-December’s values up to $66 to $66.50 in mid-January.

"Current futures-based price forecasts suggest that April prices may be closer to break-even levels, resulting in improved returns to cattle feeding by later in the spring," Jones said. "Current average break-evens are around $77 per hundredweight [cwt], but will decline to around $74.50 by April."

April live cattle futures on the Chicago Mercantile Exchange closed near 75 cents per pound [or $75 per cwt] on Jan. 25.

In addition, expected break-even prices for cattle placed in feedlots in January have decreased significantly, compared with projections for the past few months, Jones said.

"The projected break-evens for cattle expected to finish in about June are in the $71 to $72 per cwt range for steers and heifers," he said.

Jones attributed the expected lower break-even prices to a drop in feeder cattle prices and to better performance expectations of the cattle on feed.

"Performance expectations improve dramatically for cattle placed after the first of the year, relative to fall placements, mainly because of better weather typically expected in the spring months than in the winter," he said. "January-placed cattle are expected to perform about 1 percent better than annual averages, and performance improves even more for later spring placements."

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K-State Research and Extension is a short name for the Kansas State University Agricultural Experiment Station and Cooperative Extension Service, a program designed to generate and distribute useful knowledge for the well-being of Kansans. Supported by county, state, federal and private funds, the program has county Extension offices, experiment fields, area Extension offices and regional research centers statewide. Its headquarters is on the K-State campus, Manhattan.

Story by:
Mary Lou Peter, Communications Specialist
mlpeter@oznet.ksu.edu
K-State Research& Extension News