Profit Tracker: Packers Turn Tidy Profit

Feedyards lost an average of $43 per head last week, nearly $7 more than the week before, while packer profits remain in triple-digits. ( Wyatt Bechtel )

That packers hold the leverage in the current fed cattle market can be underscored by the fact they paid roughly $2.40 per cwt. more for fed cattle last week, yet feedyard closeouts increased their red ink.

Feedyards lost an average of $43 per head last week, nearly $7 more than the week before, according to the Sterling Beef Profit Tracker. The 5-area direct steer price was $119.18 per cwt., up from the previous week’s average of $116.61.                               

Increases in the cost of feeder cattle calculated against last week’s marketings contributed to increasing losses. The price of feeder cattle calculated against the fed cattle sales were $166.28, or, $5.04 per cwt. higher. The cost of finishing a steer last week was calculated at $1,701, which is $353 higher than the $1,348 a year ago. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

Beef packer operating margins slipped $18 per head to $174. The beef cutout declined $4.47 per cwt. to $211.40.

A month ago cattle feeders were earning $140 per head, while a year ago profits were calculated at $430 per head. Feeder cattle represent 76% of the cost of finishing a steer compared with 72% a year ago.

Farrow-to-finish pork producers saw their margins improve slightly to a $18 per head loss, compared with losses of $21 per head last week. Lean carcass prices traded at $50.38 per cwt., a $42.69 per cwt. improvement from the previous week. A year ago pork producers earned an average of $3 per head. Pork packer margins declined $13 per head to $25.

Cash prices for fed cattle are $9 per cwt. lower than the same week a year ago. Lean hog prices are about $8 per cwt. lower than last year.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2018 will average $115 per cow. That would be $43 per head less than the estimated average profit of $158 for 2017. Estimated average cow-calf margins were $173 in 2016, and $438 per cow in 2015.

For feedyards, Nalivka projects an average profit of $67 per head in 2018, which would be $169 less than the average of $236 per head in 2017. Nalivka expects packer margins to average about $135 per head in 2018, up from $120 in 2017.

For farrow-to-finish pork producers, Nalivka projects 2018 profit margins will average $4 per head, compared to $21 in 2017. Pork packers are projected to earn $19 per head in 2018, down from $25 profit per head in 2017.

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