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KANSAS STATE AG ECONOMIST SAYS TOUGH TIMES AHEAD FOR CATTLE FEEDLOTS
Aug. 12, 2024
Source: Oklahoma Farm Report radio network
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."
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