Profit Tracker: Beef Packer Margins Top $300

Feedyard closeouts continue to show red ink. ( FJ )

Beef packer profit margins climbed back above $300 per head last week on a $5 per cwt. rally in beef cutout prices. Cattle feeding margins slipped $15 per head lower, with closeouts showing losses of $25 per head. For the week ending Oct. 26, 2019, the packer/feeder margin spread was $328, or $52 higher than the previous week, according to the Sterling Beef Profit Tracker.

Cattle feeding margins, however, are improving. A month ago losses were estimated to be $154 per head. The packer/feeder margin spread has also declined from a peak of $553 per head in early September.

A year ago cattle feeders found profits of $36 per head on closeouts the last week in October, while packers saw profits of $218, for a spread of $180.

(Note: The Beef and Pork Profit Trackers are intended only as a benchmark for the average cash costs of feeding cattle and hogs.)

Feeder cattle represent 72% of the cost of finishing a steer compared to 74% a year ago.

The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

Farrow-to-finish pork producers saw their margins decline $9 per head, putting losses at  $16 per head. Lean carcass prices traded at $56.94 60.68 per cwt., $3.74 per cwt. lower than the previous week. A year ago pork producer losses were $1 per head. Pork packers saw average profits of $31 per head, an increase of $5 from the previous week.

Sterling Marketing president John Nalivka projects cash profit margins cow-calf producers in 2019 will average $124 per cow. That would be 13% lower compared to the $162 estimated average profit for 2018. Estimated average cow-calf margins were $164 in 2017, $176 in 2016, and $438 per cow in 2015.

For feedyards, Nalivka projects an average profit of $33 per head in 2019, which would be $9 better than the average of $24 per head in 2018. Nalivka expects packer margins to average about $192 per head in 2019, about $23 higher than in 2018.

For farrow-to-finish pork producers, Nalivka projects an average profit of $3 per head in 2019, as compared with an average profit of $1.35 per head in 2018. Pork packers are projected to earn $16 per head in 2019, about $4 less than the $20 per head profits of 2018.

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