Profit Tracker: Growing Packer/Feeder Margin Spread
The widening spread between feedlot and packer margins underscores the leverage the large packing companies wield. Beef packer margins jumped $83 per head (20%) last week to $387. The gains were mainly due to rapidly increasing wholesale beef prices, little of which translated into higher fed cattle prices.
Average prices for fed steers was $112.28 per cwt. the week ended Jan. 29, which produced average feeding margins of $47 per head. That resulted in a $340 spread between packer and feedlot profits, according to the Sterling Beef Profit Tracker.
The beef cutout average was $229 per cwt, or $11 per cwt. higher than the previous week. The cutout was also $16 per cwt. higher than the same week a year ago, while fed cattle prices were $10 per cwt. lower than a year ago. A year ago packers saw profits of $73 per head, some $314 less than this year.
The total cost for finishing a steer marketed last week was $1,479, about $5 more than the same week a year ago. Last year cattle feeders saw profits of about $185 per head the final week of January. This year feeder cattle represent 65% of the cost of finishing a steer compared with 72% 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 from a $2 per head loss to breakeven last week. Lean carcass prices traded at $58.76 per cwt., $1.63 higher than the previous week, and $2.27 higher than a month ago. A year ago pork producers lost an average of $5 per head. Pork packer margins averaged a profit of $42 per head last week, about $3 per head higher than the previous week.
Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2021 will average $123 per cow. For feedyards, Nalivka projects an average profit of $43 per head in 2021, and packer margins are projected to average $251 per head.
For farrow-to-finish pork producers, Nalivka projects 2021 will produces losses of $13 per head. Pork packers are projected to earn $37 per head in 2021.