Market leverage has shifted dramatically toward ranchers and cattle feeders over the past two months. The combination of rising cattle prices and declining wholesale beef prices has eroded the historic packer margins of a year ago to about $15 per head, according to the Sterling Beef Profit Tracker.
Feedyards saw average profits of $93 per head for the week ending Oct. 8, up about $35 per head from the previous week. That’s based on average 5-area steer prices of $146.81 per cwt.
Average breakeven for cattle placed on feed last week was $150 per cwt., which is up from the $140 calculated breakeven for cattle marketed last week. Cattle placed on feed a year ago this week had a breakeven of $126 per cwt.
The average cost of feeding a steer to finish weight was 15% higher for cattle marketed last week and is projected to be 25% higher for cattle placed on feed last week at roughly $600 per head, according to the Profit Tracker. The Beef and Pork Profit Trackers are calculated by Sterling Marketing, Vale, Oregon.
Estimated beef packer margins for the week ending Oct. 8 were $15 per head, down $4 per head from the previous week and down $711 per head from estimated margins a year ago of $726. Last week’s Choice beef cutout averaged $242.32 per cwt., about even with the previous week and down $41 per cwt. (14%) from the same week a year ago.
Feed costs for cattle marketed last week averaged $615 per head, up $83 per head from last year. The estimated total cost for finishing a steer last week was $1,962 per head, up 13% from last year’s estimate of $1,715 per head.
Cattle slaughter totaled an estimated 664,000 head, up 8,000 head from the same week last year. Packing plant capacity utilization was estimated at 90.3% compared to 90.3% the previous week and 89.6% last year.
Farrow-to-finish hog producers found profits of $20 per head last week, up $2 per head from the previous week and up $38 per head from last year’s $18 per head losses. Lean carcass prices averaged $95.37 per cwt., down $1.90 per cwt. from the previous week but up $22.51 per cwt. from last year.
Pork packers saw profits of an estimated $4 per head, up about $7 per head from the previous week. A year ago pork packers saw profits of $70 per head. Hog slaughter was estimated at 2.558 million head, up 71,000 head from the previous week and up 41,000 head from last year.
Pork packer capacity utilization was estimated at 95.2% compared to 92.6% the previous week and 96.7% last year.
(Note: The Sterling Beef Profit Tracker calculates an average beef cutout value for the week in its estimates for feedyard and packer margins. Other prices in the weekly Profit Tracker also are calculated weekly averages. Feedyard margins are calculated on a cash basis only with no adjustment for risk management practices. The Beef and Pork Profit Trackers are intended only as a benchmark for the average cash costs of feeding cattle and hogs. Sterling Marketing is a private, independent beef and pork consulting firm not associated with any packing company or livestock feeding enterprise.)
