Profit Tracker: Feeding Margins Erode

Feedyard managers are watching profit margins slowly shrink as the market settles into a seasonal summer slide. Average feeding margins registered $242 per head last week, a tidy profit any day, but $43 per head lower than the previous week, and a whopping $250 per head lower than a month ago. Primary culprit in declining profits is retreating cash prices, last week down to $118.63 per cwt., and $2 to $3 lower than the previous week, according to the Sterling Beef Profit Tracker. Feedyards were profitable on a cash basis for the 31st consecutive week.

Last week’s beef cutout price dropped $12 per cwt., to $227.27, which resulted in slightly smaller margins for beef packers at $284 per head. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

The cost of finishing a steer last week was calculated at $1,408 per head, which is $200 less than the $1,608 a year ago. A month ago cattle feeders were earning $490 per head, while a year ago profits were calculated at $97 per head. Feeder cattle represent 73% of the cost of finishing a steer, compared to 75% last year.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2017 will average $111 per cow. That would be $66 per head less than the estimated average profit of $177 for 2016. Estimated average cow-calf margins were $438 per cow in 2015.

For feedyards, Nalivka projects an average profit of $260 per head in 2017, which compares favorably with average losses of $4.25 per head in 2016. Nalivka expects packer margins to average about $105 per head in 2017, down from $114 in 2016.

For the week's Pork Tracker, click here.


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