Profit Tracker: Rally Squeezes Packer Margins
Last week’s $5 cash fed cattle rally cut packer profit margins nearly in half, while boosting feedyard margins to near $500 per head. Feedyard margins reached $491 per head, $19 higher than the previous week, according to the Sterling Beef Profit Tracker. It marked the 23rd consecutive week of positive feedyard margins.
Despite the margins decline brought by higher prices, packers still had plenty of motive to bid up, as their own margins were $43 per head, about $26 less than the previous week. The Beef and Pork Profit Trackers are calculated by Sterling Marketing, Vale, Ore.
The cost of finishing a steer last week was calculated at $1,411 per head, which is $325 less than the $1,736 a year ago.
A month ago cattle feeders were earning $424 per head, while a year ago profits were calculated at $14 per head. Feeder cattle represent 74% of the cost of finishing a steer, compared to 77% last year.
Farrow-to-finish pork producers lost $2 per hog last week, an $3 improvement from last week’s $5 loss. A month ago farrow-to-finish pork producers showed a profit of about $14 per head.
Pork packers saw their margins decrease $4 per head to $27 per head. Negotiated prices for lean hogs were $57.17 per cwt. last week, about $1 per cwt. higher. Cash prices for fed cattle are $13 per cwt. higher than last year and prices for lean hogs are about $14 per cwt. lower.
Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2017 will average $92 per cow. That would be $85 per head less than the estimated average profit of $177 for 2016. Estimated average cow-calf margins were $438 per cow in 2015.
For feedyards, Nalivka projects an average profit of $210 per head in 2017, which compares favorably with average losses of $4.25 per head in 2016. Nalivka expects packer margins to average about $24 per head in 2017, down from $114 in 2016.
