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Falling slaughter cattle prices have pushed cattle feeders' balance sheets deeper into the red and the situation is unlikely to change soon, according to Kansas State University agricultural economist Rodney Jones. "Losses are currently averaging in the $85 to $100 per head range, and will continue to be severe through early next year unless prices recover," Jones said. "These projections are based on current average break-evens [prices] that are above $75 per hundredweight [cwt] - increasing to around $77 per cwt by year's end." Slaughter cattle prices as of early October had fallen to $65 per cwt, well below break-even levels and down $5 from a month earlier. Prices have since recovered slightly, but have not reached their month-earlier levels, says a news release published by Kansas State University. Falling consumer demand for beef, linked to the weaker economy at home and in some importing countries abroad, appears to have driven the slide in cattle values, he said. Added market pressure stemmed from burdensome supplies of market-ready cattle. Although the recent drop in slaughter cattle prices has weighed on the feeder cattle and calf markets, break-even levels for cattle backgrounding and finishing programs are still well above futures-based price forecasts for late in the winter and next spring, Jones said. "This suggests that calf and feeder cattle prices may decline further unless fed cattle cash and futures prices rebound quickly. People who background and feed cattle will not place cattle with 'locked in' losses of these magnitudes for very long," he added. "The hope is, of course, that fed cattle prices recover fairly quickly so further adjustments in feeder cattle and calf prices are not a necessary response. "Producers should, however, be aware that continued weakness in fed cattle prices will result in further price declines at other levels of the cattle marketing chain, cutting into cow-calf and summer stocker profits," Jones added. © |
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