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Disappointing Year for Cow-Calf and Feeder Profits

27 September 2012

US - Drought turned 2012 into a very disappointing year for both cow-calf operations and cattle feeders, reports the Livestock Marketing Information Centre.

Going into the year, cow-calf returns were forecast to be better than 2011’s and estimates were raised in the winter months in part due to calf prices surging to record highs. Cattle feeding returns were expected to improve compared to the severe red ink posted in the last eight months of 2011.

Early expectations for a large corn crop this year added to the prospects for improved cattle feeding results. But the drought of 2012 burned-up summer pasture, crushed calf prices, and raised cow-calf production costs. Red-ink on feedlot closeouts surged during summer months as cost of gain jumped to levels never seen before.

Early last spring the LMIC estimated cow-calf returns over cash costs plus pasture rent in 2012 would be record high at about $180.00 per cow. In July, LMIC reduced that estimate to about $80.00 per cow as drought spread.

Recently, those estimates were $57.00 per cow. Of course, producers in the most drought-stricken regions had even lower margins. For comparison purposes, LMIC estimated returns in 2011 were about $86.00 per cow. It is fair to say, the drought of 2012 caused average returns for a cow-calf operation to decline by about $125 per cow compared to the no-drought situation.

If a cattle feeder sold steers every month, 2012 recorded record annual losses in the LMIC calculated return estimates. The LMIC assumes a 750-pound steer is fed-out and all feedstuff costs, yardage, etc., are reflective finishing in a Southern Plains commercial feedlot. Also, LMIC calculated returns include no risk management or any above average sale price premiums.

In 2012, the annual loss is now estimated to be just over $150.00 per steer. That compares to the prior record red ink year (2008) at about -$126.00 and 2011’s -$88.00. This year also has the distinction of having the month with the largest loss ever, which was June at over $300.00 per head. LMIC has made monthly estimates since the mid 1970’s.

Drought in 2012 took away the economic ability to begin the process of expanding the U.S. beef cowherd at least for another year or more. Drought also has pushed more cattle feeders and feedlot owners into financial stress.

TheCattleSite News Desk



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