Profit Tracker: Feedyards Gaining Leverage

Cattle feeding margins exceed packer margins. ( FJ )

Cattle feeding margins exceeded packer margins for the second consecutive week. Cattle feeders saw average profits of $146 per head the week ended Jan. 10, 2020, down $6 per head from the previous week.

Beef packer margins declined $10 per head to an average of $25, the lowest packer margin in nearly two years, according to the Sterling Beef Profit Tracker. Beef packer margins have declined $150 per head (85%) over the past month.

The packer/feeder margin spread for the week ending Jan. 10 was $121, in favor of feedyards. The packer/feeder margin spread reached a record high the week ending September 13, 2019, about a month after the Tyson fire. That week saw the packer/feeder margin spread reach $618 per head, in favor of packers, as cattle feeders lost $203 per head and beef packers saw profits of $415 per head.

The difference between the $618 advantage for packers in September and the $121 advantage for feedyards last week represents a $739 swing in the packer/feeder margin spread over the past four months.

A year ago cattle feeders found profits of $105 per head on closeouts the second week in January, while packers saw profits of $72, for a spread of $33 in the feeders’ favor.

(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 73% of the cost of finishing a steer compared to 72% 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 $3 per head, putting losses at $13 per head. Lean carcass prices traded at $52.99 per cwt., $0.44 per cwt. better than the previous week. A year ago pork producers were losing $12 per head. Pork packers saw average profits of $35 per head, a decrease of $2 per head from the previous week.

Sterling Marketing president John Nalivka said cash profit margins for cow-calf producers in 2019 averaged $114 per cow. That would be 30% 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 calculated an average profit of $39 per head in 2019, which would be $15 better than the average of $24 per head in 2018. Nalivka said packer margins averaged about $217 per head in 2019.

Related stories:

Profit Tracker: Packer/Feeder Margin Spread Flips To Favor Feeders

Grazing Cattle Sharply Higher, Fed Cattle Firm

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