Feedlots Gain as Packer Losses Deepen on Lower Beef Cutout Values

Fed cattle prices strengthened last week, lifting feedlot margins, even as packer losses widened amid a sharp decline in wholesale beef values.

The five-area direct fed cattle price averaged $231.73 per cwt for the week ended Jan. 3, up from $229.39 the prior week. The higher cash cattle prices pushed average feedlot margins to an estimated $293 per head, roughly $55 per head higher than the previous week.

Sterling Marketing by Drovers estimated the breakeven for cattle placed on feed last week at $231 per cwt, compared with $210.80 per cwt for cattle marketed during the week, reflecting continued pressure from elevated feeder cattle prices.

Despite stronger fed cattle prices, packer profitability deteriorated as wholesale beef values moved lower. The comprehensive beef cutout averaged $342.15 per cwt for the week, down nearly $12 per cwt from the previous week’s average. As a result, packer margins were estimated at a loss of $360 per head, compared with a loss of about $221 per head a week earlier.

Cattle slaughter for the week totaled an estimated 474,000 head, up from 426,000 head the prior week but well below year-ago levels. Beef production rose to 423.7 million pounds, compared with 381.2 million pounds the previous week, while average carcass weights edged lower to 896 pounds.

Plant utilization rates increased but remained below typical levels, with fed cattle plants operating at 65.3% of capacity and cow plants at 55.0%.