Kansas State University Extension Livestock Market Economist Dr. Glynn Tonsor commented Aug. 9 on his most recent feedlot return study, which doesn’t look good for the beef cattle industry.
Tonsor warned of red ink for feedlot businesses beginning in September and continuing through next spring.
“Those returns are projected to be negative,” he said. “ The main reason is, yes, fed cattle prices are expected to go up, but nowhere near the rate that the incoming f eeder cattle prices have gone up.”
He explained that the main pr ofit drivers for feedlots are incoming cattle costs, feed costs and the cattle sell price. If producers pay a higher incoming rate on feeder cattle, profit margins will be squeezed. Tonsor forecast this trend will stretch from September to March 2025, adding that those w ho designated their livestock risk protection plans to protect against the feeder cattle price increase should be wary of incoming cattle costs.
“Most of the time when we have that discussion, people jump to the fed cattle sale price protection part,” he said. “ 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 bet ter than what I’ve seen for the rest of the year.”
Tonsor said 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 the y operate on or their higher quality product, will be in bet ter shape. However, the same goes for feeders that are behind the average and will experience larger losses than his study based on what averages show.
Analyzing the Meat Demand Monitor, Tonsor and his team look at the concentration of public meat purchases.
“A minority of the public is buying a majority of the me at, as opposed to the 330 million peo ple 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 r everse, and there is a shift within the beef space on frequency much more than there is across pork and chicken products.”