Senior Farm and Ranch Broadcaster, Ron Hays, is featuring comments with Kansas State University Extension Livestock Market Economist, Dr. Glynn Tonsor about his most recent feedlot return study which doesn’t look good for the beef cattle industry into the fall through early 2025. He warned of red ink for the feedlot business beginning in September and continuing through next spring.
“Those returns are projected to be negative,” Dr. Tonsor said. “The main reason is, yes, fed cattle prices are expected to go up, but nowhere near the rate that the incoming feeder cattle prices have gone up.”
He explained that the main profit drivers for feedlots are what they pay for cattle coming in, how much it costs to feed them, and what they bring when they sell. If they pay more at a higher rate for incoming feeder cattle than they make from outgoing cattle, margins will be squeezed. This is the scenario that Dr. Tonsor forecasts for the period encompassed from this September through next March.
Tonsor said that people who designated their LRP to protect against the feeder cattle price increase, so their purchasing price was lower. “Most of the time when we have that discussion, people jump to the fed cattle sale price protection part. There is a role for that, too, that we can talk about, but here in this arena, the biggest source of change is the rally we’ve seen in lighter-weight cattle. So, someone that was protecting against that upward move is definitely in a position to do better than what I’ve seen for the rest of the year.”
He added that his study is a barometer that doesn’t represent any one operation and that feeders who are getting higher premiums per head due to the grid they operate on or their higher quality product, will be in better shape. However, the same goes for feeders that are behind the average and will experience larger losses than his study based on averages shows.
Another project that Dr. Tonsor has been working on is the Meat Demand Monitor. Recently, he and his team have been using it to look at the concentration of public meat purchases.
“A minority of the public is buying a majority of the meat, as opposed to the 330 million people in the country all buying similar amounts,” he said.
“The frequency of beef consumption is notably higher for males than females, and for younger individuals than older individuals,” he said. “Looking at adjustments across income, when you have a lower income, you are more likely to have had ground beef yesterday than a steak. For higher income, it is the reverse, and there is a shift within the beef space on frequency much more than there is across pork and chicken products.”
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