The cattle market has been mostly on a downward trend in 2015. That’s been the case for cow-calf producers, the stocker sector and the feedlot end of the business. Kansas State University Extension Livestock Market Economist Dr. Glynn Tonsor said it’s a very perilous time for cattle feeders. Based on his latest projections of feedlot cattle returns, operators have suffered large losses this year and that gushing of red ink will continue into 2016.
“It’s very bearish,” Tonsor said. “The closeouts that are projected from October through July, they are all negative and particularly negative for the next six months. When we look October through December, they all are $460 to almost $500 losses being projected and the core reason for that is we have over a $40 gap between the projected fed cattle price and the break-even fed cattle prices needed.”
Unless feeders protected themselves from a decline in fed cattle prices at the time of placement, Tonsor said they will experience substantial losses on their fourth quarter close outs.
Feeders are experiencing massive, historic losses and negative margins. That downward trend will continue into 2016. Red ink will follow those negative margins, but Tonsor said we’re going to start to see losses diminish somewhat next spring. He is predicting the best month for closeouts will be May 2016 with projections of minus $45. While there isn’t much improvement in the projected fed cattle prices between November and May, he said there is a projected difference in the price paid for the feeder calf. In looking at the second half of 2016, Tonsor is holding out for more positive news. He said strong beef demand could provide price support.
Global economic and global beef demand concerns are one of the reasons for the decline in cattle prices this year. Tonsor said if global beef demand improves, fed cattle prices could rally. He doesn’t see that happening in the next 60 days, but it’s a possibility in 2016.
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