Profit Tracker: Stronger Packer, Feeder Margins

A weaker cash cattle market produced stronger profit margins for both packers and feedyards last week. Cattle feeding profits registered nearly $184 per head, $40 better than the previous week despite a $2 per cwt. decline in the cash market. Packers saw their margins jump $33 per head to $121.

Improving profit margins are the result of a significant decline in the cost of feeder cattle placed against last week’s marketings, according to the Sterling Beef Profit Tracker. Feeder cattle calculated against last week’s fed cattle sales were priced at $140.40 per cwt., $7.58 per cwt. and $58 per head less than the previous week.

The 5-area direct cash price was $119.97, down $2, while break evens declined nearly $5 per cwt. to $106.70. Beef packer margins improved on the lower cost of cash cattle and a $2 increase in the beef cutout to $208.45. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

The cost of finishing a steer last week was calculated at $1,485 per head, which is $52 less than the $1,537 a year ago. A month ago cattle feeders were earning $99 per head, while a year ago profits were calculated at $117 per head. Feeder cattle represent 73% of the cost of finishing a steer, compared to 77% last year.

Farrow-to-finish pork producers saw their margins improve $10 per head to $25.78. Lean carcass prices traded at $70.40, an increase of $6.23 per cwt. from the previous week. A year ago pork producers earned an average of $10 per head. Pork packer margins totaled $11 per head last week, a decline of $12 per head.

Cash prices for fed cattle are $1 per cwt. higher than the same week a year ago. Lean hog prices are about $8 per cwt. higher than last year.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2018 will average $103 per cow. That would be $55 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 $92 per head in 2018, which would be $144 less than the average of $236 per head in 2017. Nalivka expects packer margins to average about $73 per head in 2018, down from $118 in 2017.

For farrow-to-finish pork producers, Nalivka projects 2018 profit margins will average $13.75 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.

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