Profit Tracker: Packer Margins Continue Slide

Higher cash cattle prices pulled average packer profit margins under $20 per head last week. ( Wyatt Bechtel )

A $3-plus rally in cash fed cattle prices pulled packer margins under $20 per head last week. Despite the increase in cash prices, cattle feeding margins slipped $6 per head, but remain at $206. Declines in cattle feeding profits were the result of higher costs, mostly due to a $57 per head increase in the cost of feeder cattle calculated against last week’s marketings, according to the Sterling Beef Profit Tracker.

The 5-area average Choice steer price last week was $129.88, up $3.68 per cwt. The price of feeder cattle calculated against the fed cattle sales were $153.30 per cwt., or $6.21 per cwt. higher. The cost of finishing a steer last week was calculated at $1,601, which is $169 higher than the $1,432 a year ago. The beef cutout remained relatively steady at $207.79 per cwt. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

A month ago cattle feeders were earning $196 per head, while a year ago profits were calculated at $233 per head. Feeder cattle represent 74% of the cost of finishing a steer, compared to 73% last year.

Farrow-to-finish pork producers saw their margins decline $9 per head to $25. Lean carcass prices traded at $69.48, a decline of $4.32 per cwt. from the previous week. A year ago pork producers earned an average of $39 per head. Pork packer margins improved from breakeven to an $8 profit per head.

Cash prices for fed cattle are $10 per cwt. higher than the same week a year ago. Lean hog prices are about $2 per cwt. lower than last year.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2018 will average $122 per cow. That would be $36 per head less than the estimated average profit of $158 for 2017. Estimated average cow-calf margins were $438 per cow in 2015.

For feedyards, Nalivka projects an average profit of $86 per head in 2018, which would be $150 less than the average of $236 per head in 2017. Nalivka expects packer margins to average about $90 per head in 2018, down from $123 in 2017.

For farrow-to-finish pork producers, Nalivka projects 2018 profit margins will average $18.25 per head, compared to $20.87 in 2017. Pork packers are projected to earn $19 per head in 2018, down slightly from $25 profit per head in 2017.