Profit Tracker: Packer Margins Shoot Higher

Cattle feeding margins held firm last week while packer margins more than doubled.
Cattle feeding margins held firm last week while packer margins more than doubled.
(Wyatt Bechtel)

Solid gains in the beef cutout price last week coupled with a slight decline in cash cattle prices resulted in an excellent week for beef packers. Profit margins improved $65 per head to an average of $130, according to the Sterling Beef Profit Tracker.

Cattle feeding margins remain solidly profitable at $175 per head, mostly unchanged from last week despite cash prices that dipped slightly more than $1 per cwt.  Average costs for finishing a steer declined about $21 per head.

The 5-area average Choice steer price last week was $126.31, while the price of feeder cattle calculated against the fed cattle sales were $151.05 per cwt., or $2.79 per cwt. lowr. The cost of finishing a steer last week was calculated at $1,583, which is $206 higher than the $1,377 a year ago. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

A month ago cattle feeders were earning $212 per head, while a year ago profits were calculated at $357 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 decline $5 per head to $14. Lean carcass prices traded at $64.20 per cwt., a decline of $1.94 from the previous week. A year ago pork producers earned an average of $27 per head. Pork packer margins improved $3 per head to $22.

Cash prices for fed cattle are $2 per cwt. higher than the same week a year ago. Lean hog prices are about $6 per cwt. lower than last year.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2018 will average $122 per cow. That would be $36 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 $86 per head in 2018, which would be $150 less than the average of $236 per head in 2017. Nalivka expects packer margins to average about $90 per head in 2018, down from $123 in 2017.

For farrow-to-finish pork producers, Nalivka projects 2018 profit margins will average $18.25 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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