Profit Tracker: Packer/Feeder Margin Spread Flips To Favor Feeders

Cattle in feedyard
Cattle in feedyard
(FJ)

Cattle feeding margins exceeded packer margins last week for the first time in more than two years. Cattle feeders saw average profits of $151 per head last week while packer margins slipped to $35 per head, according to the Sterling Beef Profit Tracker. That means the packer/feeder margins spread is $116 in favor of feedyards.

The packer/feeder margins 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 $116 advantage for feedyards last week represents a $734 swing in the packer/feeder margins spread over the past four months.

According to the Sterling Beef Profit Tracker, packer margins of $35 per head last week were the lowest since the week ending May 19, 2018.

Cattle feeders saw cash prices $2 higher last week, resulting in a $67 per head improvement in profit margins to the week’s average of $151.

A year ago cattle feeders found profits of $78 per head on closeouts the first week in January, while packers saw profits of $94, for a spread of $16 in the packers’ favor.

(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 73% 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 $3 per head, putting losses at $16 per head. Lean carcass prices traded at $52.55 per cwt., $1.93 per cwt. better than the previous week. A year ago pork producers were losing $18 per head. Pork packers saw average profits of $37 per head, a decrease of $8 per head from the previous week.

Sterling Marketing president John Nalivka said cash profit margins for cow-calf producers in 2019 averaged $114 per cow. That would be 30% lower compared to the $162 estimated average profit for 2018. Estimated average cow-calf margins were $164 in 2017, $176 in 2016, and $438 per cow in 2015.

For feedyards, Nalivka calculated an average profit of $39 per head in 2019, which would be $15 better than the average of $24 per head in 2018. Nalivka said packer margins averaged about $220 per head in 2019.

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