Profit Tracker: Capacity Utilization Declines as Supplies Tighten

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Rising wholesale beef prices and declining packing plant utilization are two indicators to watch as the 2023 cattle markets unfold. Wholesale beef prices have increased about 7% during February, while packing plant capacity utilization is down 5%. The Sterling Beef Profit Tracker for the week ending Feb. 18, 2023, put both feedyards and packers solidly in the black, but rising costs pose a threat to both segments.

Cattle feeders found average profits of $97 per head last week as cash prices edged $1.50 per cwt. higher to $161. A year ago cash prices were at $142.50 per cwt. Beef packers saw profits of about $76 per head, owing much of that profit to wholesale beef prices that rose 7% in a contra-seasonal move during February. Packer margins a year ago were estimated at $303 per head.

Wholesale beef prices improved $7.63 per cwt. to $273.90 per cwt., and higher still this week. The Beef and Pork Profit Trackers are calculated by Sterling Marketing, Vale, Oregon.

Costs associated with finishing cattle continue increasing. Cattle sold last week carried a total feed cost of $593 per head, which is 27% higher than the $432 feed costs for cattle sold the same week a year ago.

Cattle marketed last week had a breakeven of $154.05 per cwt., while cattle placed on feed last week have a breakeven of $156 per cwt. Cattle placed last week are calculated to have a purchase price for 750-800 lb. feeder steers at $179.67 per cwt., and feed costs of $593 per head. The feeder steer price is 11% higher than last year.

The estimated total cost for finishing a steer last week was $2,156 per head, up 16% from last year’s estimate of $1,826 per head.

Fed cattle slaughter totaled an estimated 488,433 head, about 2,000 head fewer than the previous week and 2,000 head fewer than the same week last year. Packing plant capacity utilization was estimated at 85.2% compared to 89.9% last year.

Farrow-to-finish hog producers saw losses of $12 per head last week, about steady with the previous week. Pork producers saw profits of $61 per head the same week a year ago. Lean carcass prices averaged $80.15 per cwt., a gain of $7.09 per cwt. from the previous week.

Pork packers saw losses of about $5 per head, or $2 per head more than the previous week. Last year pork packers saw profits of $19 per head. Hog slaughter was estimated at 2.505 million head, down 7,000 head from the previous week and up 23,000 head from last year.

Pork packer capacity utilization was estimated at 93.3% compared to 92.2% 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.)

 

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