Profit Tracker: Packer/Feeder Margin Spread Down 50%

Feedyard margins are improving ( U. Sask. )

The combination of shrinking packer profits and smaller feedyard losses over the past month brings the packer/feeder margin spread to $288 for the week ending Oct. 11, 2019, which is down $108 from the previous week. While the spread remains large, it has narrowed by nearly 50% from the $546 spread found August 23.

A year ago cattle feeders lost an average of $67 per head on closeouts the second week in October, while packers saw profits of $155, for a spread of $222.

Last week’s near $2 rally in cash fed cattle prices helped reduce cattle feeding losses $75, yet average per head losses still totaled $38, according to the Sterling Beef Profit Tracker. Packer margins shrunk $33 per head as a result of the higher cash prices, but packers still saw profits of $250.

(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 74% 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 improve $9 per head, putting losses at  $14 per head. Lean carcass prices traded at $56.19 per cwt., $3.03 per cwt. higher than the previous week. A year ago pork producer profits were $5 per head. Pork packers saw average profits of $34 per head, a decrease of $3 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 $161 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 $46 per head in 2019, which would be $22 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 $6 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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