Profit Tracker: Margins Retreat On Lower Prices

Cattle feeding margins slipped $24 per head the week ending Jan. 31 as cash fed cattle prices fell $2. Average feedyard closeouts found profits of $185 per head, according to the Sterling Beef Profit Tracker.

Beef packer margins declined $6 per head to an average of $70. The packer/feeder margin spread for the week ending Jan. 31 narrowed to $115 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 $115 advantage for feedyards last week represents a $733 swing in the packer/feeder margin spread over the past five months.  

A year ago cattle feeders found profits of $102 per head on closeouts the third week in January, while packers also saw profits of $102. (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 71% 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 $6 per head to losses of $6. Lean carcass prices traded at $56.59 per cwt., $2.58 per cwt. better than the previous week. A year ago pork producers were losing $11 per head. Pork packers saw average profits of $26 per head, a decrease of $17 per head from the previous week.

Sterling Marketing president John Nalivka projects cow-calf profit margins of $144 per cow in 2020, or $27 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 $112 for 2020, or $73 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 $200 per head for packers in 2020.

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