Profit Tracker: Margins Drop $111 Per Head

Cash fed cattle prices dipped just $1 per cwt., but cattle feeding profit margins declined $111 per head last week to $57. The sharp drop in margins was largely due to an $11 per cwt. increase in the cost of feeder cattle calculated against last week’s marketings, according to the Sterling Beef Profit Tracker.

Beef packer margins also declined, an average of $6 per head to $87. Sterling Marketing president John Nalivka says it may seem odd that beef packer margin declined despite lower cattle costs and a higher cutout. “However, that margin also included cattle from the prior week (65%) as well as last week’s cattle. Therefore, the margin was not as good as last week’s cattle cost alone would suggest.”

Cash fed cattle prices averaged $123.34 per cwt., while last week’s beef cutout averaged $209.84, up $5 per cwt. from the previous week. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

Break even prices for steers sold last week averaged $119.22 per cwt., about $7 per cwt. higher than the previous week. Cattle placed on feed last week have a projected breakeven of $120.87 per cwt.

The cost of finishing a steer last week was calculated at $1,659 per head, which is $156 more than the $1,503 a year ago. A month ago cattle feeders were earning $17 per head, while a year ago losses were calculated at $49 per head. Feeder cattle represent 75% of the cost of finishing a steer, compared to 72% last year.

Farrow-to-finish pork producers earned an average of $4 per head last week, with lean carcass prices at $62, nearly $4 lower than the previous week. A year ago pork producers lost an average of $35 per head. Pork packer margins totaled $31 per head last week, about $12 per head higher than the previous week.

Cash prices for fed cattle are $19 higher than the same week a year ago. Lean hog prices are about $19 per cwt. higher than last year.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2017 will average $136 per cow. That would be $46 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 $228 per head in 2017, which compares favorably with average losses of $4.25 per head in 2016. Nalivka expects packer margins to average about $118 per head in 2017, up from $114 in 2016.

For farrow-to-finish pork producers, Nalivka projects 2017 profit margins to average $20 per head, compared to $5 per head last year. Pork packers are projected to earn $24 per head in 2017, up slightly from $24 profit per head in 2016.