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Sharp drop in profitability for cow-calf producers

Cow-calf producers are seeing a sharp drop in profitability in 2016.

According to the Sterling Beef Profit Tracker, cash profit margins for cow-calf producers are expected to average 178 dollars per cow this year. That compares to 433 dollars last year and 518 dollars in 2014.

John Nalivka publishes the Beef Profit Tracker report.

“We’ve seen, beginning about last fall, about a 40 percent drop in feeder cattle and calf prices—and also a pretty good drop on cull cow prices,” Nalivka says. “Conseqently, we’ve seen that subsequent drop in margins.”

Nalivka predicts average margins will continue to slide in 2017, to 82 dollars per cow.

“We’re building the herd and increasing numbers and increasing production—and that’s going to weigh on those prices across the supply chain even more than it has this year,” he says. “That’s the cattle cycle and that’s the economics of the meat industry.”

Nalivka says cattle feeders should benefit from lower calf prices and reduced feed costs. He projects a feedlot profit margin of 112 dollars per head in 2017.

Nalivka is the president of Sterling Marketing based in Vale, Oregon.

AUDIO: John Nalivka