The years 2002-2005 were generally profitable for cattle feeders, says Dillon Feuz at www.lmic.info. The University of Nebraska economist says 2006 will likely be much different, with losses some weeks possibly exceeding $150/head.
How do these returns compare to historical returns? Feuz modeled weekly feedlot returns for Nebraska based on average Nebraska feeder cattle prices and Nebraska fed cattle prices. For the 2000-2002 period, Feuz estimates feedlots averaged a $40/head loss. During the 4th quarter of 2001 and the 1st quarter of 2002, losses averaged $115/ head, with one week seeing losses of more than $200/head. In contrast, he estimates average profits were $80/head sold from 2002-2005.
Feuz says feedlots found the first few weeks of 2006 profitable but returns have been negative since February. At current fed-cattle price levels, he estimates losses of about $90/head.
If cash prices follow the CME Live Cattle board and decline into the mid-to upper-$70s in the next couple of months, he says losses likely will average more than $125/head. Feeder prices have declined some in recent weeks, but Nebraska feedlots may not generate positive returns until the 4th quarter of 2006, he adds. -- Livestock Marketing Information Center