Feedlot Margins Better, Packer Margins Slip

A $1 per cwt rally helped boost cattle feeding profits marginally last week while packers lost a little off their large margins. ( Wyatt Bechtel )

Average feedlot margins topped $28 per head last, some $5 better than the previous week due to cash prices mostly $1 higher at $108 per cwt. Packer margins fell $13 per head, but remain near $263, according to the Sterling Beef Profit Tracker. Sterling noted it raised fabrication costs $20 per head in its model to account for a 12% increase in wages from 2013 to 2018.  

The beef cutout declined $3.05 per cwt., closing at $207.52. The cost of finishing a steer last week was calculated at $1,475, which is $34 higher than the $1,457 a year ago. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

A year ago cattle feeders were earning $21 per head. Feeder cattle represent 73% of the cost of finishing a steer compared with 74% a year ago.

Farrow-to-finish pork producers saw their margins improve $3 per head to a negative $49 per head. Lean carcass prices traded at $41.48 per cwt., $2.69 per cwt. lower than the previous week, and $8.67 lower than a month ago. A year ago pork producers earned an average of $8 per head. Pork packer margins averaged a profit of $46 per head last week.

Cash prices for fed cattle are $3 per cwt. higher than the same week last year. Lean hog prices are about $21 per cwt. lower than last year.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2018 will average $132 per cow. That would be $26 per head less than the estimated average profit of $158 for 2017. Estimated average cow-calf margins were $173 in 2016, and $438 per cow in 2015.

For feedyards, Nalivka projects an average profit of $58 per head in 2018, which would be $166 less than the average of $224 per head in 2017. Nalivka expects packer margins to average about $145 per head in 2018, up from $120 in 2017.

For farrow-to-finish pork producers, Nalivka projects 2018 profit margins will average a loss of $5 per head in 2018, compared to profits of $21 in 2017. Pork packers are projected to earn $21 per head in 2018, down from $25 profit per head in 2017.