Cattle Market’s Bottom Is In, Nalivka Says

Profit margins should improve for cow-calf and feedlots next year.
Profit margins should improve for cow-calf and feedlots next year.
(CAB)

Cow-calf operations have struggled with profitability much of this year, but Sterling Marketing president John Nalivka says better days may lie ahead. He told AgriTalk host Chip Flory on Thursday his projections suggest that 2020 will be the low-water mark for calf prices and cow-calf profitability.

“Producers were doing really well in 2014 and 2015, but when we compare this year to those years cow-calf profits are down 80%,” Nalivka said. “I think we’ve hit the bottom and we’re moving up now. For two or three years I think (cow-calf profitability) will look pretty good.”

Feedyards should also see improved profitability going forward.

“I am projecting good feeding margins going into next year,” Naivka said.

He projects cash fed cattle will trade from about $118 per cwt. to the upper $120’s during the early months of 2021. He said breakevens will range from $112 per cwt. to $116 per cwt.

“That give you a positive margin, but obviously if we have a treacherous winter that raises feeding costs that could change.”

Nalivka said COVID-19 has obviously disrupted the cattle industry, and beef demand has experienced a “demand disruption to the positive side. And now we’re beginning to get past the backlog of cattle” that was created last spring.

Nalivka also acknowledged the efforts of the packing industry in helping minimize the impact of the pandemic.

“The packing industry spent a billion dollars to address COVID.” He called the packing companies’ response to pandemic’s impact on the industry “phenomenal. They have done an incredible job.”

Beef packers, of course, had plenty of incentive to keep their doors open as they saw record profits during the height of the pandemic last spring. Still, Nalivka said by utilizing Saturday kills, their harvest capacity utilization is currently 93%, compared to the 50% to 60% that was common in April.

As for profit margins, Nalivka said it is important to realize that most packers are producing value-added products, and with the increase in quality of fed cattle coming to the plants, “they are going to have a better margin. The margins now are $250 a head, whereas a packer when they made $10 a head (a few years ago) they were celebrating. We’re beyond that now. And it's the quality of the cattle and the entire industry has moved ahead to quality in in addressing what the consumer wants to buy.”

 

 

Latest News

Getting Consumers to Shop Retail’s Deli-Prepared

An online quantitative survey of 1,193 consumers was able to identify opportunities and challenges to getting consumers to shop the deli-prepared section of their grocery store.

20 min ago
.
Trump Pardons South Dakota Ranchers

President Trump granted full pardons to members of a South Dakota ranching family who were supported by Governor Kristi Noem and Senator Mike Rounds.

5 hours ago
.
Angus Names Esther McCabe Director of Performance Programs

The American Angus Association® recently named Esther McCabe, Ph.D., a third-generation Angus producer originally from Elk City, Kansas, as director of performance programs.

8 min ago
Alltech E-CO2 has developed the Feeds EA™
Alltech E-CO2 launches Feeds EA™ model to lower feed footprint

As agriculture moves towards more sustainable solutions and ingredients, Alltech E-CO2 has developed the Feeds EA™ model to help feed manufacturers and producers measure and lower the carbon footprint of their feed.

20 min ago
Feeding margins declined
Profit Tracker: Cattle, Hog Margins In The Red

Higher grain prices and lower cash livestock prices contributed to a decline in feeding margins last week, leaving closeouts showing red ink for both cattle and hogs.

1 day ago
CAB Insider: Carcass Value Shifts, a Sign of the Times

Jan. fed cattle prices are normally choppy and we’re seeing that pattern in 2021. A primary difference, compared to 2020, is that last week’s average price is $14/cwt. lower, the same discount as the 5-year average.

18 min ago