Cattle feeding margins improve, packers slip

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Cattle feeding margins improved nearly $25 per head last week, leaving average losses at just over $55 per head, according to the Sterling Beef Profit Tracker. Margins have improved $85 over the past two weeks.

Beef packers saw their margins decline more than $15 per head on the week leaving losses at more than $59 per head. The Sterling Beef Profit Quotient improved 71 points for the week and the industry profitability index is now negative 183.2, according to estimates developed by Sterling Marketing, Inc., Vale, Ore. A month ago the Sterling Beef Profit Quotient was a negative 222.8.

Pork producer margins improved nearly $5 per head last week, with margins now at a negative $33.81 per hog marketed. Negotiated cash hog prices improved $1.67 per hundredweight last week to $82.74. Pork packer margins declined $5.17 per head for the week, creating losses of $0.82 per head, according to the Sterling Pork Profit Tracker.

A year ago cattle feeders sold cash cattle at $123 per hundredweight, resulting in losses of $20.30 per head. Last year cash hogs fetched $80.86 per hundredweight, resulting in losses of $11.78 per head.

The Sterling Beef and Pork Profit Trackers are calculated using actual weekly prices for both cattle and hogs, feed costs, beef and pork cutout prices, drop credits and other factors that influence profit margins.

The Sterling Beef Profit Tracker for the week ending Dec. 22:

  • Average feedyard margins: -$55.70 per head.
  • Average packer margins: -$59.00 per head.
  • Sterling Profit Quotient: -183.2.

The Sterling Pork Profit Tracker for the week ending Dec. 21:

  • Average farrow-to-finish margins: -$33.81 per head.  
  • Average pork packer margins: -$0.82 per head.

The Sterling Beef and Pork Profit Trackers are produced by Sterling Marketing Inc. and John Nalivka, president, Vale, Ore., and are published weekly by Drovers/CattleNetwork.



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anonymous    
WV  |  December, 28, 2012 at 11:37 AM

How do cattle feedlots and meat packers stay in business? They are always operating at a loss. Someone please explain this economic anomaly. Thank you.

Greg Henderson    
Kansas  |  December, 28, 2012 at 01:53 PM

The Sterling Beef Profit Tracker is calculated on a cash basis. For feedyards, the inputs are feeder cattle, feed, interest, etc. The Profit Tracker does not consider variables feedyards might employ, such as hedging, risk management, buying light cattle and putting them on grass for a period of time before placing them on feed, or other management strategies that can reduce costs. The same is true for the packer margins - calculated on a cash basis only.

Spencer Steen    
Overland Park KS  |  December, 28, 2012 at 04:56 PM

If these banks would ever audit these feedlots and cattle feeders we will see some very nervous people. The amount of money thrown at these feedlots is absord. They are all inflating their books and hoping the market eventually turns in their favor. Banks are turning their heads and hoping for the same thing. They want to keep loaning money to these idiots. Thank you to Robobank in particular for adding fuel to the fire!


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