Profit Tracker: Rally Cuts Packer Margins By 20%

Last week's $3 cash cattle rally cut beef packer margins by 20%. ( FJ )

Last week’s $3 per cwt rally in cash fed cattle prices pulled feeding margins out of the red and cut beef packer profit margins by 20%. For the week ending July 12, cattle feeders found average profits of $14 per head, about $25 per head better than the previous week, according to the Beef Profit Tracker.

(Note: The Beef and Pork Profit Trackers are intended only as a benchmark for the average cash costs of feeding cattle and hogs.)

Cash fed cattle prices rallied $3 per head to an industry average of $112.63 per cwt., which cut into packer margins. Yet, despite a decline of $55 per head, packers continued to see profit margins of about $214 per animal processed. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

A year ago cattle feeders were losing an average of $55 per head on cash prices of $110. Feeder cattle represent 71% of the cost of finishing a steer compared to 73% a year ago.

Farrow-to-finish pork producers saw their margins improve $1 per head with profits of $23. Lean carcass prices traded at $70.95 per cwt., $0.76 per cwt. higher than the previous week. A year ago pork producer margins were positive $32 per head. Pork packers saw average losses of $6 per head last week.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2019 will average $138 per cow. That would be 14% 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 $62 per head in 2019, which would be $38 better than the average of $24 per head in 2018. Nalivka expects packer margins to average about $155 per head in 2019, about $11 less than in 2018.

For farrow-to-finish pork producers, Nalivka projects an average profit of $13 per head in 2019, as compared with an average profit of $1.35 per head in 2018. Pork packers are projected to earn $16 per head in 2019, about $4 less than the $20 per head profits of 2018.

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