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

Cattle in feedyard ( FJ )

Cattle feeding margins exceeded packer margins last week for the first time in more than two years. Cattle feeders saw average profits of $151 per head last week while packer margins slipped to $35 per head, according to the Sterling Beef Profit Tracker. That means the packer/feeder margins spread is $116 in favor of feedyards.

The packer/feeder margins 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 $116 advantage for feedyards last week represents a $734 swing in the packer/feeder margins spread over the past four months.

According to the Sterling Beef Profit Tracker, packer margins of $35 per head last week were the lowest since the week ending May 19, 2018.

Cattle feeders saw cash prices $2 higher last week, resulting in a $67 per head improvement in profit margins to the week’s average of $151.

A year ago cattle feeders found profits of $78 per head on closeouts the first week in January, while packers saw profits of $94, for a spread of $16 in the packers’ 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 71% 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 improve $3 per head, putting losses at $16 per head. Lean carcass prices traded at $52.55 per cwt., $1.93 per cwt. better than the previous week. A year ago pork producers were losing $18 per head. Pork packers saw average profits of $37 per head, a decrease of $8 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 $220 per head in 2019.

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