By historical standards, data from the Livestock Marketing Information Center (LMIC) suggests 2015 will be a banner year for cow-calf producers in terms of economics. That’s even considering the recent hard break in cash and futures prices, with the fall run of calves barely begun, says Glynn Tonsor, agricultural economist at Kansas State University (KSU).

Tonsor shared LMIC data at last week’s KSU Beef Stocker Field Day. Before the recent price break, that data suggested net cash returns, not counting labor costs, of $450 per cow. Adjusting for the last couple of weeks, and minus any other major market corrections, Tonsor said you could shave $100-$150 from the expectation. At $300 per head, for example, net returns would still be about twice the level of historical highs.

My personal abacus is missing too many beads to dispute that. Though running below prices of a year ago, calf and feeder prices still remain historically high, feed costs remain lower than when corn production seemed akin to printing money, and until recently, domestic beef demand was stronger than many anticipated.

On the other hand, there are already reports of bred heifers and older bred cows heading to auction, as prices continue to erode for calves, feeders, fed cattle and wholesale beef. By all reports, a slug of heifers were retained, developed and bred to market this fall. So far, prices for these replacements follow expectations at reputation sales. Prospects for the run-of-the-herd variety, however, appear a little more dicey.

The much-discussed backlog of heavyweight fed cattle—credited with so much of the current economic pressure—will finally make their way through the packinghouse. That appears to be a ways off, though.

“Packers are buying fed cattle, at heavily reduced prices compared to just a few weeks ago, but are also scheduling those cattle for delivery three to four weeks out (according to industry reports),” say LMIC analysts.

Reports from some feedlots corroborate that notion, suggesting the longest-fed, most overdone cattle are the packer-owned ones.

Choice boxed beef prices were $252.29 per cwt July 1. They dropped to a low of about $233 the first part of August and opened September at $241.21. They were $209.31 Sept. 29. Select followed a similar trajectory—$249.26 July 1 and $207.69 at the end of September.

By all accounts, even with the free fall in wholesale prices, packer margins are in the black. Short term, there seems little incentive for them to accelerate production. And that’s with 50% lean trim prices 65% less than a year ago and hide and offal values down 27% year to year.

Longer term, you get to wondering if enough packing capacity has been shuttered the last few years that it now aligns more closely with the current, smaller inventory.

It’s the feedlots that are drowning in red ink, at least on a cash-to-cash basis.

Based on a 12-month rolling average of projected net returns for Kansas feedlots, Tonsor projects steers marketed in February to lose $211 per head (cash to cash). With the same measuring stick, the previous worst was $193 per head loss in July of 2013.

Heading into the fourth quarter, LMIC forecasts cash prices for steers weighing 700-800 pounds at $193-$201 per cwt, according to Tonsor. Prices for steer calves weighing 500-600 pounds were forecast at $239-$249. With last week’s price break, Tonsor suggested peeling off $10-$15 per cwt.

For perspective, steers weighing 700-800 pounds averaged $197.64 per cwt. in the North Central region last week, according to the Agricultural Marketing Service (AMS); $190.38 in the South Central. Steers weighing 500-600 pounds averaged $208.99 in the South Central region and $193.91 in the Southeast.

The biologic cow cycle is too long for knee-jerk reactions to a market that could gain a bounce as the fall progresses—wheat pasture prospects are reported to be positive.

Understandably, some producers who can, are delaying marketing. Some of those are pushing the pencil to gauge the risk and potential reward of backgrounding through the current marketing season.

Overall, though, you could be forgiven for wondering if sheer economics are going to cap current herd expansion sooner rather than later.

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