Extreme Packer Profits Climbing

Beef packers are enjoying historic profit levels with robust consumer demand and strong beef cutout values.
Beef packers are enjoying historic profit levels with robust consumer demand and strong beef cutout values.
(Wyatt Bechtel)

Beef packer margins continued to grow last week even as cash fed cattle prices advanced $1 per cwt. The average packer margin was estimated at $372 per head, up $29 from the previous week, according to the Sterling Beef Profit Tracker. Packer margins have more than doubled over the past month.

Meanwhile, cattle feeding margins have slipped into the red. Last week feeders lost an average of $42 per head, slightly better than the $57 losses recorded the week before, but $65 less than the $107 profits of a month ago. The Choice beef cutout price closed on Friday at $227.53 per cwt.

Cash cattle prices improved $1 per cwt. to $110.30. The cost of finishing a steer last week was calculated at $1,578, which is $171 higher than the $1,407 a year ago. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

A year ago cattle feeders were earning $486 per head. Feeder cattle represent 74% of the cost of finishing a steer compared with 73% a year ago.

Farrow-to-finish pork producers saw their margins improve $4 to a $21 per head profit. Lean carcass prices traded at $69.98 per cwt., a $3.28 per cwt. improvement from the previous week. A year ago pork producers earned an average of $33 per head. Pork packer margins slipped $4 to $6 per head.

Cash prices for fed cattle are $26 per cwt. lower than the same week a year ago. Lean hog prices are about $5 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 $51 per head in 2018, which would be $185 less than the average of $236 per head in 2017. Nalivka expects packer margins to average about $118 per head in 2018, down from $120 in 2017.

For farrow-to-finish pork producers, Nalivka projects 2018 profit margins will average a loss of $1.25 per head, compared to profits of $21 in 2017. Pork packers are projected to earn $18 per head in 2018, down from $25 profit per head in 2017.


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