Profit Tracker: Prices Stall, Margins Steady

Cattle feeding margins are steady
Cattle feeding margins are steady
(FJ)

Cash cattle prices stubbornly steady to $1 higher gave a slight boost to feedyard margins and left packer margins nearly unchanged. Both feeders and packers, however, were left with modest mid-winter profits, according to the Sterling Beef Profit Tracker.

For the week ending Feb. 21, 2020, average feedyard closeout saw profits of $162 per head, about $2 per head higher than the previous week on cash prices that were nearly $1 higher at $119.66. Beef packer profits averaged $68 per head, less than $1 higher.

The packer/feeder margin spread for the week ending Feb. 21 was $94 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 $94 advantage for feedyards last week represents a $712 swing in the packer/feeder margin spread over the past six months.

A year ago cattle feeders found profits of $145 per head on closeouts the third week in February, while packers saw profits of $78. (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 72% 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 nearly $2 per head to losses of $19. Lean carcass prices traded at $51.52 per cwt., $0.69 per cwt. higher than the previous week. A year ago pork producers were losing $21 per head. Pork packers saw average profits of $19 per head, steady with the previous week.

Sterling Marketing president John Nalivka projects cow-calf profit margins of $142 per cow in 2020, or $24 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 $107 for 2020, or $68 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 $163 per head for packers in 2020.

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