Beef Buzz News
KSU's Dr. Glynn Tonsor Projects Feedlots To At Least Break Even, Maybe Turn a Small Profit By Early 2021.
Wed, 15 Jul 2020 08:44:05 CDT
Feedlots are still losing money today, but the bleeding has slowed substantially says Dr. Glynn Tonsor, Kansas State University Extension livestock market economist. On today’s Beef Buzz, Dr. Tonsor, who regularly surveys feedlots, talks about the profitability outlook going into early 2021.
Ron Hays Beef Buzzes With Dr. Glynn Tonsor
Projected closeouts for someone who is not hedging, for June-August, losses of over $100, Tonsor said. He noted this is smaller than the $300 per head losses they experienced earlier in the spring.
Then September through the first quarter of 2021, probably a break even deal as he projects anything from a negative $20 to a positive $30.
Cattle placed today would be included in those months and if you choose to hedge you could even see a profit margin, Tonsor said.
But that could change depending on COVID-19 impacts on demand, he said.
Tonsor said the main point here is the cattle feeding sector has seen notable improvement since early May.
We’re chipping away at the backlog as we see processing numbers return to normal, he said.
The K-State economist noted a possible increase in cost of gain as the USDA lowered its estimate of the U.S. corn acreage and increased purchases by China.
Equal importance on the cost of gain, Tonsor said, is we’re probably bringing in animals heavier than normal and this will change the duration of feeding, he said.
Tonsor’s projections are based on a cost of gain around $80 per hundredweight, and he said you could easily add maybe 10 cents if corn gets more expensive.
Two major USDA reports coming out in the coming weeks is attracting Tonsor’s attention.
Cattle on feed report scheduled for July 24 and the mid-year cattle inventory report.
I am optimistic we’re working through the backlog and hope to see that reflected in the cattle on feed report, Tonsor said.
With the cattle inventory report Tonsor expects to see some herd downsizing.
My gut tells me we’ve pulled the trigger on contracting and I’m a little more bearish than some, Tonsor said.
We may be shrinking the herd more than some analysts are suggesting, he said.
Click on the LISTEN BAR below to hear more comments from Dr. Glynn Tonsor.
The Beef buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network and is a regular audio feature found on this website as well. Click on the LISTEN BAR below for today’s show and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
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