Estimated Packer Margins Up; Feedlots Not So Much

Estimated beef packer margins rose $51.36 a head last week as lower fed cattle prices and higher beef prices combined to help their bottom lines.  Feedlot margins also improved, but remain very much in the red.

The Sterling Beef Profit Tracker, calculated by Sterling Marketing and published by Ag Web, estimated unhedged feedlot margins at a minus $256.83 on every animal sold to the packers last week.  This is up $13.44 from $270.27 the previous week but down $144.05 from the $112.78 losses seen a month earlier.  A year ago, feedlots were making $194.24 a head.

The calculated cost of the feeder cattle that made up last week’s sales of fat cattle to packers was $227.15 per cwt, down $5.57 from $232.72 a week earlier but up $4.44 from $222.71 a month ago.  The price, however, was up $60.35 from $166.80 a year ago.

Feeder steers made up 79.43% of the feedlot cost for the finished animal, down slightly from 79.48% the previous week but up from 78.64% a month earlier and well above the 73.79% of a year earlier.

Feed costs for the cattle sold last week also declined to help feedlot bottom lines.  The Profit Tracker said feed costs for these cattle averaged $312.52 a head, $7.93 below the previous week’s $320.45 and $14.07 below the $326.59 of a month earlier and even $22.16 below last year’s $334.68.

On a percentage basis, feed costs made up 14.10% of the costs for cattle sold to packers last week, down slightly from 14.12% the previous week.  A month ago, feed made up 14.88% of the cost of a finished animal, and a year ago, feed was 19.10% of the cost.




Packer margins gained last week as the price of choice steers in Texas and Oklahoma fell $3.04 per cwt to $150.12 on a live basis from $153.16 the week before.  Estimated packer margins hit $86.66 a head last week, up from $35.30 the previous week and even slightly higher than the $86.62 of a month earlier.

A year ago, packers were making $49.41 a head.

Aiding last week’s packer margin were higher wholesale beef prices, the Profit Tracker said.  The adjusted beef cutout was $248.56 per cwt, up $3.56 from $245.00 the previous week but down $11.91 from $260.47 a month earlier.  The cutout was up $12.10 from $236.46 a year earlier.

A falling drop credit, however, is working against packer margins.  The drop credit, or the total value of all non-carcass by products like the hide and internal organs, fell $8.44 per head last week to $180.81 from $189.25 the previous week.

The drop credit also was $7.56 lower than the $188.37 of a month earlier and $30.22 below the $211.03 of a year earlier.




Whatever is hitting feedlots’ bottom lines is not affecting the cow/calf producer.  Estimated per-cow returns for producers this year is $658.00, up $110, or 20.1% from 2014.

And the returns keep growing.  Compared with 2013, cow/calf returns this year were expected to be $414.95, or 170.7%, higher.  It’s little wonder that ranchers and farmers are trying to grow the herd.




Cash cattle markets were quiet again Tuesday ahead of a holiday-shortened kill week.  Bids were expected near $148 to $150 per cwt on a live basis.  Asking prices were expected to hold at $152 to $153.

On a dressed basis, asking prices were $245 per cwt.  Last week, cattle traded at $148 to $150 live and at $238 to $242 dressed.

Wholesale beef prices were mixed Tuesday, with the USDA reporting its choice cutout value at $254.13 per cwt, up $1.09, and its select cutout at $247.99, down $0.07.  Volume was moderate with 105 loads of fabricated product moving into the spot market.

The CME Feeder Cattle Index for the seven days ended Monday was $227.66 per cwt, down $0.37, compared with Tuesday’s Aug settlement of $225.35.