Profit Tracker: Packer Gambit Pays Dividends

A month ago beef packers were losing an estimated $155 for every animal slaughtered. Their strategy of reducing slaughter and putting less beef in front of consumers has helped flip their margins to a positive $41 per head, according to the Sterling Beef Profit Tracker.

Cattle feeding margins declined $15 per head the week ending September 2 to an average of $389. While the packer-feeder margin spread narrowed, market leverage remains solidly in favor of cattle feeders.

For the week ending September 2, cash cattle prices posted roughly a $1.26 per cwt. decline to average $183.31 per cwt. That price is 20% higher than last year’s $145.61 per cwt. cash price.

Wholesale beef prices posted an average of $311.07 per cwt., a $1.96 per cwt. decline from the previous week. The Beef and Pork Profit Trackers are calculated by Sterling Marketing, Vale, Ore.

Cattle sold last week carried a total feed cost of $548 per head, up about $6 per head from the previous week, and 3% lower than the $569 feed costs for cattle sold the same week a year ago.

Cattle marketed last week had a breakeven of $155.49 per cwt., while cattle placed on feed last week have a breakeven of $182.92 per cwt. Cattle placed last week are calculated to have a purchase price for 750-800 lb. feeder steers at $248.91 per cwt., and feed costs of $418 per head. The feeder steer price is 28% higher than last year.

The estimated total cost for finishing a steer last week was $2,176 per head, up 13% from last year’s estimate of $1,898 per head.

Fed cattle slaughter totaled an estimated 487,186, down 2,346 head from the previous week and 11,307 fewer than the same week last year. Packing plant capacity utilization was estimated at 85.2% compared to 87.2% last year.

Farrow-to-finish hog producers saw profits of about $3 per head last week, about $8 per head less than the previous week. Pork producers saw profits of $38 per head the same week a year ago. Lean carcass prices averaged $84.35 per cwt., down $6.40 per cwt. from the previous week, and down $11.54 over two weeks.

Pork packers closed the week with $9 per head profits, down $3 per head from the previous week. Last year pork packers were losing about $23 per head. Hog slaughter was estimated at 2.388 million head, down 112,000 head from the week before and up 19,000 head from last year.

Pork packer capacity utilization was estimated at 87.7% compared to 85.6% 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.)