Profit Tracker: Feeding Margins Decline As Costs Rise

Both cattle feeding and beef packer margins remain solidly profitable. ( Wyatt Bechtel )

Cattle feeders saw a $1 per cwt. gain in fed cattle prices last week, only to find profit margins shrink by $55 per head. Average closeouts reported profits of $140 last week, but feeder cattle costs calculated against last week’s marketings rose $70 per head, according to the Sterling Beef Profit Tracker.

The 5-area average Choice steer price last week was $127.56, while the price of feeder cattle calculated against the fed cattle sales were $157.71 per cwt., or $8.37 per cwt. higher. The cost of finishing a steer last week was calculated at $1,635, which is $280 higher than the $1,355 a year ago. The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.

Beef packer operating margins declined $2 per head to $160, despite a slight gain in the beef cutout to $223.13 per cwt.

A month ago cattle feeders were earning $206 per head, while a year ago profits were calculated at $426 per head. Feeder cattle represent 75% of the cost of finishing a steer compared with 72% a year ago.

Farrow-to-finish pork producers saw their margins decline $7 per head to $8 per head. Lean carcass prices traded at $61.20 per cwt., a decline of $3.22 from the previous week. A year ago pork producers earned an average of $26 per head. Pork packer margins improved $2 per head to $17.

Cash prices for fed cattle are $2 per cwt. lower than the same week a year ago. Lean hog prices are about $8 per cwt. lower than last year.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2018 will average $133 per cow. That would be $25 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 $84 per head in 2018, which would be $152 less than the average of $236 per head in 2017. Nalivka expects packer margins to average about $92 per head in 2018, down from $120 in 2017.

For farrow-to-finish pork producers, Nalivka projects 2018 profit margins will average $11.25 per head, compared to $20.87 in 2017. Pork packers are projected to earn $18 per head in 2018, down from $25 profit per head in 2017.