Profit Tracker: Feeding Margins Erode

A $5 per cwt. decline in fed cattle prices last week cut closeout profits $50 per head. ( Wyatt Bechtel )

Cattle feeders have witnessed their close out margins decline nearly $100 per head over the past month. Last week’s $5 per cwt. dip in fed cattle prices cut profits by $50 per head, with closeouts showing average profits of $79, according to the Sterling Beef Profit Tracker.

The 5-area average Choice steer price last week was $120.68, while the price of feeder cattle calculated against the fed cattle sales were $153.70 per cwt., or $2.73 per cwt. lower. The cost of finishing a steer last week was calculated at $1,600, which is $246 higher than the $1,354 a year ago. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

Beef packer operating margins gained $15 per head to $171, despite a $3 decline in the beef cutout to $220.16 per cwt.

A month ago cattle feeders were earning $174 per head, while a year ago profits were calculated at $412 per head. Feeder cattle represent 74% of the cost of finishing a steer compared with 71% a year ago.

Farrow-to-finish pork producers saw their margins decline $15 per head to a negative $14 per head. Lean carcass prices traded at $51.41 per cwt., a decline of $5.29 from the previous week. A year ago pork producers earned an average of $14 per head. Pork packer margins improved $9 per head to $31.

Cash prices for fed cattle are $6 per cwt. lower than the same week a year ago. Lean hog prices are about $14 per cwt. lower than last year.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2018 will average $133 per cow. That would be $25 per head less than the estimated average profit of $158 for 2017. Estimated average cow-calf margins were $173 in 2016, and $438 per cow in 2015.

For feedyards, Nalivka projects an average profit of $84 per head in 2018, which would be $152 less than the average of $236 per head in 2017. Nalivka expects packer margins to average about $92 per head in 2018, down from $120 in 2017.

For farrow-to-finish pork producers, Nalivka projects 2018 profit margins will average $11.25 per head, compared to $20.87 in 2017. Pork packers are projected to earn $18 per head in 2018, down from $25 profit per head in 2017.