Maintaining Margins A Challenge For Packers

According to the Sterling Profit Tracker, packer margins more than doubled last week to $29.35 per head from $12.22 a week earlier, but amid the market turmoil over fed cattle price gyrations, maintaining these margins remains a challenge.

Certain holiday-oriented beef cuts have been firm to higher, but now appear to be losing favor with meat buyers.  Prices for many other cuts are sagging as well, with the standout cut being the loin, according to USDA figures.

The USDA’s choice boxed beef price Thursday fell $2.50 per cwt to $212.77 while select fell $5.13 to $201.25.

A look at the daily differences of some of the primal cuts, or larger sections of the carcass, show that choice ribs (about 9% of the carcass) dropped the most on Thursday, with a one-day decline of $5.11 to $358.65, short of this year high of $392.17.




But the falling away doesn’t end there.  Much larger portions of the carcass, the chuck and the round, called end cuts since they come from the front and rear of the carcass, each dropped sharply on Thursday.  Chucks (about 29% of the carcass) were down $3.29 per cwt on the day at $172.11 from $175.40 and were off $7.11 from last Friday’s $179.22.

Rounds (about 22% of the carcass) Thursday fell $4.17 per cwt to $183.19 from $187.36 on Wednesday and were off $4.13 from last Friday’s $187.32.

Loins, (comprising about 16% of the carcass) were a brighter spot for the packers Thursday, being up $0.92 per cwt from Wednesday at $283.11 from $282.19.  Loins also were up $0.77 for the week.




Items from the rib primal include ribeye roasts, ribeye steak, and the ribeye filet.  Some of these cuts have been selling well, even though other cuts have been a drag.

One that has been doing well is the boneless ribeye.  Last week, this product hit a record $894.95 per cwt, up from the previous record of $7.20.21, set the last week of November last year, as shown in a Livestock Marketing Information Center graph.

Wholesale beef loins strip prices are doing better for the packer than last year or the previous five-year average, but this item typically isn’t a big deal at this time of year anyway, and this year is no exception.

Trimmings that go into hamburger often show some life in the holiday season, but this year, they have lagged.  Fresh, 50% lean trimmings have shown a seasonal price move, but at levels well below last year and the 2009-13 average.




Plains direct fed cattle markets remained quiet Thursday with the USDA reporting only scattered action via its mandatory price reporting rule.

For the week to date, only 595 steers were sold at an average price of $124.74 per cwt on a live basis.  No heifers have sold on a live basis.  On a dressed basis, 1,058 steers have sold at an average of $201.47, and 116 heifers have changed hands at $201.31.

Cattle traded in a wide range last week at mostly $133 to $135 per cwt, while on a dressed basis, prices were mostly $204 to $206.  In the Corn Belt, cattle traded at $130 to mostly $131 live and $205 to $208 dressed.

Wholesale beef prices Thursday were lower, with the USDA choice cutout at $211.80 per cwt, down $3.01 on the day, and its select cutout at $200.48, off $3.71.

The choice/select spread widened to $11.32 from $10.32 on Wednesday, and there were 102 loads of fabricated product sold into the spot market.

The CME Feeder Cattle Index for the seven days ended Wednesday was $182.15 per cwt, down $2.05.  This compares with the Nov settlement Thursday of $175.37, up $0.52.