Profit Tracker: Margins And Caution Increase
Feedyards and packers earned tidy profits on a cash basis last week, but the numbers suggest the party is winding down. Cash fed cattle prices rallied $2 per cwt. last week, which boosted per head profits to $292, about $13 better than the previous week. Feedyards were profitable for the 33rd consecutive week, according to the Sterling Beef Profit Tracker.
Last week’s beef cutout price dropped $8 per cwt., to $210, which resulted in a $67 per head decline in beef packer margins to $172 per head. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.
Caution flags are out due to the swift decline in the beef cutout, along with projected higher breakeven prices ahead. Break even for cattle marketed last week was estimated at $98.83 per cwt., but cattle placed on feed last week show a break even of $112.65 per cwt.
The cost of finishing a steer last week was calculated at $1,377 per head, which is $176 less than the $1,553 a year ago. A month ago cattle feeders were earning $303 per head, while a year ago profits were calculated at $130 per head. Feeder cattle represent 72% of the cost of finishing a steer, compared to 74% last year.
Farrow-to-finish pork producers earned $65 profit per hog last week, a $1 per head increase from the previous week. A month ago farrow-to-finish pork producers showed a profit of $52 per head.
Pork packers saw their margins increase $2 per head to $24. Negotiated prices for lean hogs were $89.33 per cwt last week. Cash prices for fed cattle are $3 per cwt. higher than last year and prices for lean hogs are about $12 per cwt. higher.
Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2017 will average $112 per cow. That would be $65 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 $260 per head in 2017, which compares favorably with average losses of $4.25 per head in 2016. Nalivka expects packer margins to average about $105 per head in 2017, down from $114 in 2016.
For farrow-to-finish pork producers, Nalivka projects 2017 profit margins to average $19 per head, compared to $5 per head last year. Pork packers are projected to earn $22 per head in 2017, down slightly from $24 profit per head in 2016.
