Packer Margins Rise As Feedlot Margins Sink

Packer margins further into positive territory week, while feedlot margins continued to sink, falling to a loss of more than $200 a head.

The weekly Sterling Beef Profit Tracker published by AgWeb said packers last week cleared about $64.79 a head, a jump from a positive $28.41 the previous week.  However, a month ago, packers were losing $55.64 on each animal.

Packers arrived at their new margin by way of lower prices for slaughter cattle.  The average USDA’s five-area direct price declined to $159.58 per cwt from $160.59 the previous week and from $165.77 a month earlier.  A year earlier, packers paid $146.73 for similar cattle.

The beef cutout barely moved last week, rising $0.05 per cwt to $257.50 from $2576.45, although this was up from $248.13 a month earlier and last year’s $229.16.

However, the drop credit, the combined values of hides and internal products, fell last week to $191.88 a head from $194.08 a week earlier and $204.79 a month earlier.  Last year, it was $213.84 a head and was a major part of total profitability.




Cattle feeders aren’t faring so well.  The Profit Tracker has them losing an average of $206.94 on every head sold last week, compared with $190.31 a week earlier and $128.80 a month ago.  Last year, they were making $179.71 a head.

The same declines in fed cattle prices that brought packers into black ink are taking sellers farther into the red.

In addition, the 750- to 800-pound feeder steers that went into last week’s feedlot marketings to packer buyers were rising, hitting $237.28 last week, compared with $236.17 a week earlier and $239.05 a month earlier.  A year ago, the fed cattle sold to packers cost an average of $164.93 when purchased as feeder cattle.

The per-head feed costs of cattle sold last week averaged $303.98, down from $309.37 a week earlier but up from $292.16 a month earlier.  For cattle sold as fed cattle a year ago, feed costs totaled $333.63 a head.

For cattle placed into feedlots last week, the average price needed to break even was $156.99 per cwt, down from $162.69 a week earlier and $162.29 a month earlier.  For comparison, the breakeven price for calves placed on feed a year ago was $146.87.

That means, that if fed cattle and all other input prices held steady, last week’s feedlot placements might turn a small profit.  But the futures market, which has prices for all delivery months, except Dec, so they can’t be hedged at a profit.





No cash trading was reported Wednesday and bids were scarce at $253 per cwt on a dressed basis.  Asking prices held at $263 dressed and at $161 to $162 on a live basis.

Cash cattle markets last week traded lower to $157.50 to $160, mostly $158, on a live basis and at $252 to $254, mostly $253, dressed.  These were $3 to $6 below the previous week’s mostly $160 to $161 and $256 to $260.

The USDA’s beef cutout value Wednesday was mixed, with choice at $258.55 per cwt, up $0.83 from Tuesday and select at $246.06, down $1.92.  Volume was very active with 173 loads of fabricated product sold into the spot market.

The USDA said beef markets Wednesday were characterized by moderate demand and heavy offerings.  Ribs, chucks and rounds were steady to firm along with choice loins.  Select loins were lower.  Trimmings were lower amid light-to-moderate demand and moderate offerings.

The CME Feeder Cattle Index for the seven days ended Tuesday was $215.79 per cwt, up $0.89 on the day and $0.73 below the Apr settlement of $216.52.