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Economic Indicators: Indicators Display Red Flags

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Caution flags appear in most of Drovers Economic Indicators from April, flipping the overall arrow sideways. Feedyard margins remain a star performer in this month’s analysis, and stocker and feeder cattle prices are higher. But the seasonal price rally will soon fade toward a summer low, and lower prices will chip away at those hefty feedyard profits.

Caution is found in larger on-feed placements and overall increases in beef production. Cost of production remains relatively unchanged and the steer-corn ratio is strong. Packer margins declined 65% during April, even though they remain solidly profitable. Packer leverage will increase in the coming weeks. Beef cow and heifer slaughter has ticked up, suggesting expansion has slowed.

Editor’s Note: This article orginially appeared in the May 2017 issue of Drovers.

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