Sort & Cull

Higher Cattle Prices Don't Guarantee Profitability

ShayLe Stewart
By  ShayLe Stewart , DTN Livestock Analyst
Feeder cattle prices have jumped sharply higher with the onset of cheaper corn prices. (DTN file photo by Jim Patrico)

The feeder cattle market has been in a peculiar position throughout the year as it's had to juggle mixed messages. Prices are higher than a year ago; there are fewer calves and feeders in the market than a year ago, and the cattle market is sitting in a position to continue trading higher. But even with fat cattle prices trending higher, they aren't high enough to justify paying current feeder cattle prices with the market's current cost of gains.

Which leads us to these logical questions. What's going to happen next? Which end of the spectrum is going to give? Will feeder cattle prices get cheaper? Will fat cattle prices become stronger?

A crystal ball would be handy right about now, and to be truthful, given that the market hasn't gotten past the Christmas/New Year's lull, it's too early to say what exactly is going to happen.

Most recently, the onset of cheaper corn prices has sent feeder cattle booming throughout Monday's market, as feedlots eagerly welcome the idea of cheaper cost of gains. It's common, everyday talk to mention how high grain and hay prices are, but the conversation needs to go further in saying that, even with these higher output prices, it's still hard to skin any profit out of today's current environment.

We know that prices are expected to be higher for both feeder cattle and fat cattle in 2023, as the industry simply doesn't have as many cattle as it possessed in years past. But with the onset of higher inputs and higher interest rates, will the higher profits be enough to ensure a profitable bottom line?

The answer to that question comes down to the producer, which is you and me. I pray that prices are higher in 2023 and 2024, but neither you nor I can control what prices do. What we can control is knowing our breakeven point and knowing whether or not we will be profitable in these evolving markets.

ShayLe Stewart can be reached at shayle.stewart@dtn.com

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