Profit Tracker: Packer/Feeder Margin Spread Widens

Feedyard closeouts remain profitable ( FJ )

Cattle feeders and beef packers continue finding modest mid-winter profits. For the week ending Feb. 14, 2020, average feedyard closeout saw profits of $160 per head, up about $17 per head from the previous week on cash prices that were $2 lower at $119. Beef packer profits averaged $63 per head, according to the Sterling Beef Profit Tracker.

The packer/feeder margin spread for the week ending Feb. 14 widened to $97 per head 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 $97 advantage for feedyards last week represents a $715 swing in the packer/feeder margin spread over the past six months.

A year ago cattle feeders found profits of $122 per head on closeouts the first week in February, while packers saw profits of $76. (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 71% of the cost of finishing a steer compared to 74% 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 $5 per head to losses of $21. Lean carcass prices traded at $50.83 per cwt., $1.66 per cwt. lower than the previous week. A year ago pork producers were losing $17 per head. Pork packers saw average profits of $19 per head, a decrease of $3 per head from the previous week.

Sterling Marketing president John Nalivka projects cow-calf profit margins of $144 per cow in 2020, or $27 per cow better than 2019. Estimated average cow-calf margins were $162 in 2018, $164 in 2017, $176 in 2016, and $438 per cow in 2015.

For feedyards, Nalivka calculates an average profit of $112 for 2020, or $73 per head better than the estimated $39 per head in 2019. Average profits per head were estimated at $24 in 2018, and $181 in 2017. Nalivka said packer margins averaged about $216 per head in 2019, and he projects average profits of $200 per head for packers in 2020.