Profit Tracker: Packer, Feeder Margins Are Polar Opposites

( Wyatt Bechtel )

Profit margins for cattle feeders and beef packers are trending in opposite directions. No surprise there, but the spread between the two is widening rapidly, and rising corn prices may quickly consume any meager remaining feedyard profits.

Cash fed cattle prices held steady at $115 for the week ending May 31, but average cattle feeding margins dipped $41 per head to a meager $28 profit. Packers saw their margins improve $33 per head to $236, according to the Sterling Beef Profit Tracker.

The beef cutout rose $2.65 per cwt. to close at $220.96. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

A year ago cattle feeders were losing an average of $77 per head. Feeder cattle represent 69% of the cost of finishing a steer compared with 70% a year ago.

Farrow-to-finish pork producers saw their margins decline $7 per head with profits of $42. Lean carcass prices traded at $79.83 per cwt., $3.19 per cwt. lower than the previous week, and $3.16 lower than a month ago. A year ago pork producer margins were positive $21 per head. Pork packer margins averaged a loss of $0.32 per head last week.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2019 will average $153 per cow. That would be modestly lower compared to the $161 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 $72 per head in 2019, which would be $48 better than the average of $24 per head in 2018. Nalivka expects packer margins to average about $167 per head in 2019, about $2 less than in 2018.

For farrow-to-finish pork producers, Nalivka projects an average profit of $17.50 per head in 2019, as compared with an average profit of $1.35 per head in 2018. Pork packers are projected to earn $15 per head in 2019, about $5 less than the $20 per head profits of 2018.

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