Profit Tracker: Packers’ Leverage Grows

June 30, 2015 11:59 AM
Profit Tracker: Packers’ Leverage Grows

Beef packer profit margins continued to grow last week as the beef cutout jumped nearly $5 per cwt. and cash fed cattle prices declined another $2 per cwt. That combination nearly doubled packer margins to $155 for every animal processed, according to the Sterling Beef Profit Tracker.

Despite the lower live sales price, feedyard closeouts improved $108 per head. The result was an average loss of $148 per animal. The improvement was due to a dramatically lower price for feeder steers in the calculations, $211.06 per cwt. this week versus $227.15 per cwt. in last week’s report.  Feeder cattle represent 78.4 % of the cost of finishing a steer, significantly higher than last year’s 73.4%.

The lower cost of feeder steers helped reduce feedyard losses from $256.83 per head two weeks ago to $148.98 last week. The calculated breakeven for steers shipped last week was $159.88 per cwt., $10 per cwt. lower than the week before. A year ago feedyards were showing a profit of $280 per head.

A month ago beef packers were earning $65 on every animal processed, while a year ago packers were earning $80, Sterling Marketing estimates. Pork packers saw their margins improve $1.30 to $2.31 per head. Pork packer margins have hovered near the breakeven mark for several weeks. Cash prices for fed cattle are $6 per cwt. lower than last year, and negotiated hog prices are $50 per cwt. lower than last year.

Nalivka projects average cash profit margins for cow-calf producers at $541 per cow this year. Last year’s estimated average cow-calf margins were $548 per cow.

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