Profit Tracker: Hogs See Lowest Breakeven Since 2020 While Beef Breakeven Prices Jump Higher

Last week’s substantial drop in the breakeven feeding cost for feeder cattle placed on feed last week is significant to the market outlook, says John Nalivka, president of Sterling Marketing Inc.

“High breakeven prices together with record beef prices pose a potential problem for the market. If consumers bulk, and so far they have not to any large extent, this will pressure prices down the supply chain and lead to severe losses in the feedlot in the face of high breakeven prices, i.e. November 2015,” Nalivka says. “At the same time, I would expect stronger pork prices with stronger demand as consumers increase pork purchases.”

Although the beef market has come under pressure this week, Nalivka says it is important to remember that it is the week before the Labor Day weekend and this is not out of the ordinary.

“It may not be an indication of weakening beef demand,” he says. “We need to get into October to know more about demand.”

Negotiated cash cattle retreated an average of $3.58 per cwt. the week ending Aug. 24 and profit margins dropped by $72 per head to an industry average of $95 per head, according to the Sterling Beef Profit Tracker. Meanwhile, beef packers saw losses improve $54 per head to a loss of $5 per head. That puts the packer/feeder margin spread at $100 per head in favor of the feeder.

Cash cattle averaged $186.17 per cwt. the week ending Aug. 24, while composite wholesale beef prices posted a $2.29 per cwt. gain to close at $317.63 per cwt.

Cattle marketed last week carried a total feed cost of $342.44 per head, up $5.63 per head from the previous week, and about $200 less than feed costs for cattle sold the same week a year ago.

Cattle marketed last week had a breakeven of $179.38 per cwt., while cattle placed on feed last week have a breakeven of $177.80 per cwt., which is about $1.58 per cwt. higher than the previous week and $5.70 per cwt. higher than the same week a year ago. Cattle placed last week are calculated to have a purchase price for 750-800 lb. feeder steers at $240 per cwt., or $19.20 per cwt. less than a month ago.

The estimated total cost for finishing a steer last week was $2,511 per head, up 13% from last year’s estimate of $2,180 per head.

Fed cattle slaughter totaled an estimated 495,520 up 13,233 head from the same week last year. Packing plant capacity utilization was estimated at 84.6% compared to 82.4% last year.

View the full Sterling Beef Profit Tracker for the week ending Aug. 24.

Farrow-to-finish hog producers found positive margins of $31 per head last week, down $2.56 from the previous week, according to the Sterling Pork Profit Tracker Lean carcass prices averaged $84.71 per cwt., down $1.21 per cwt. from the previous week.

Hogs placed for finishing last week had the lowest breakeven since December 2020 at $65.73 per head.

Pork packers saw average profits of $14 per head, down $3.37 from the previous week. Last year pork packer margins were $12.67. Hog slaughter was estimated at 2.435 million head, up 77,794 head from the same week last year.

Pork packer capacity utilization was estimated at 93% compared to 90% last year.