Profit Tracker: Rally Boosts Packer Margins

Average feeding margins have turned positive.
Average feeding margins have turned positive.
(GH)

Last week’s $1 increase in cash fed cattle prices did little for feedyard profits, but the $6.40 rally in wholesale beef prices added another $25 onto already large packer margins.

Average cattle feeding closeouts remained in the black for the second week, with modest profits of $28 per head for the week ending Nov. 8, according to the Sterling Beef Profit Tracker. Beef packers saw their margins jump to $385 per head despite paying an average of $114 to $115 for live cattle. The packer/feeder margin spread was $357, about $39 more than the previous week.

A year ago cattle feeders found profits of $58 per head on closeouts the second week in November, while packers saw profits of $234, for a spread of $176.

(Note: The Beef and Pork Profit Trackers are intended only as a benchmark for the average cash costs of feeding cattle and hogs.)

Feeder cattle represent 72% of the cost of finishing a steer compared to 73% a year ago.

The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

Farrow-to-finish pork producers saw their margins decline $7 per head, putting losses at $35 per head. Lean carcass prices traded at $47.54 per cwt., $3.88 per cwt. lower than the previous week. A year ago pork producers were losing $6 per head. Pork packers saw average profits of $60 per head, an increase of $23 per head from the previous week.

Sterling Marketing president John Nalivka projects cash profit margins cow-calf producers in 2019 will average $124 per cow. That would be 13% lower compared to the $162 estimated average profit for 2018. Estimated average cow-calf margins were $164 in 2017, $176 in 2016, and $438 per cow in 2015.

For feedyards, Nalivka projects an average profit of $33 per head in 2019, which would be $9 better than the average of $24 per head in 2018. Nalivka expects packer margins to average about $192 per head in 2019, about $23 higher than in 2018.

For farrow-to-finish pork producers, Nalivka projects an average profit of $3 per head in 2019, as compared with an average profit of $1.35 per head in 2018. Pork packers are projected to earn $16 per head in 2019, about $4 less than the $20 per head profits of 2018.

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