Estimated Margins Go Up For Cattle Feeders, Packers

Cattle feeders and packer buyers could be talking on civil terms with each other this week after estimated margins for both rose last week.

Returns for packers and unhedged feedlots improved last week, with feed yard closeouts up $12.30 per head from the previous week to $94.88, and packer margins up $41.57 a head to $108.30, according to the Sterling Beef Profit Tracker from Sterling Marketing, Vail, Ore., published by Drovers.

 

COUNTER-SEASONAL BEEF RALLY

 

Data from the USDA’s Agricultural Marketing Service that was compiled by the Livestock Marketing Information Center shows the USDA’s cutout value of choice 600- to 900-pound boxed beef rose over the last two weeks.

That is similar to the 2018 pattern but counter to the average seasonal decline of 2013-2017, and it is this unusual strength in beef prices that many are crediting with the stronger margins for packers and feedlots.

If the beef market returns to a more normal pattern, prices for choice boxed beef will decline into about mid-February before turning higher for the spring rally.

 

LOWER FEEDER PRICES HELP FEEDLOT MARGINS

 

But while many are quick to point out the strength in beef prices underpinning cash cattle prices, the Sterling Profit Tracker points to lower feeder steer prices for much of the margin gains.

The feeder steer price used for the latest weekly calculations was the Oklahoma City price of $148.46 per cwt for 750- to 800-pound steers.  This was down from the purchase price of $152.31 for feeder steers sold as fed cattle the week ended Jan. 18.

The purchase price for the feeder steers sold as fed cattle a month earlier was $147.80 per cwt.  For cattle sold a year earlier, the purchase price was $142.77.

 

FEED COSTS UP

 

Feed costs for feedlots is rising, the Profit Tracker showed.  The total feed cost for cattle sold to packers last week was $279.55 a head.  This was up from 275.52 a head for cattle sold to packers the previous week.

Feed costs also were up from the $277.07 it took to feed out those sold for slaughter a month earlier and were well above the $265.74 it took a year ago.

And if corn futures prices are any indication, traders think feed costs will continue rising through the summer.

 

BEEF CUTOUT BOOSTS PACKER MARGINS

 

The ones to benefit the most from higher boxed beef prices last week were the packers.  Their estimated margins rose to $108.30 a head from $66.73 a week earlier as the beef cutout rose to $216.00 from $211.60.

The beef cutout last week also was up from $213.93 a month earlier and $205.69 a year earlier.

The drop credit was of little help to packer margins last week, holding near steady at $134.04 a head, compared with $134.60 a week earlier.

 

CATTLE, BEEF RECAP

 

No fed cattle sold on the Fed Cattle Video Exchange Wednesday.  Sixty-three head traded last week at $123 per cwt on a live basis.

Cash cattle traded last week at $122 to $123 per cwt on a live basis, down $2 from the previous week and at $197 on a dressed basis, steady to up $1.

The USDA choice cutout Wednesday was down $0.08 per cwt at $218.05, while select was up $0.43 at $213.00.  The choice/select spread narrowed to $5.05 from $5.56 with 89 loads of fabricated product sold into the spot market.

The CME Feeder Cattle index for the seven days ended Tuesday, was $142.99 per cwt, down $0.08.  This compares with Wednesday’s Jan settlement of $142.37, down $0.27, and the Mar contract settlement of $144.30, up $0.05.