Feedyard profit margins eroding as demand weakens

Cattle feeding profits declined another $56 per head last week as cash fed cattle prices dropped $2 to $3 per hundredweight. Profitability, however, remains near $70 per head for cattle marketed last week, but the seasonal trend continues lower. Packer margins were steady to $1 per head lower for the week, and held in the red for the fifth consecutive week. The Sterling Profit Quotient fell 167 points for the week, according to estimates developed by Sterling Marketing Inc., Vale, Ore.

Soft demand for beef the past few weeks has contributed to a weaker market. Boxed beef prices declined $3 per hundredweight last week, with Choice at $177 per hundredweight, and Select at $172. The Choice/Select spread continues to widen.

“Estimates for feedlot feed costs, breakeven prices, and margins are generated based on the cost of a 775- pound feeder steer, and corn prices (Western Kansas) during the week the cattle were placed on feed,” says John Nalivka, Sterling Marketing president.

“The days on feed for those animals and closeout week are then calculated using average data that might be expected for feeding performance, i.e. feed conversion and ADG. Breakevens and margins will vary according to differences in the cost of cattle, cost of feed, and feeding performance,” Nalivka says.

The Sterling Beef Profit Tracker is calculated using actual weekly prices for Choice fed steers, feeder steers, feed costs, boxed beef-cutout prices, hide and offal values, and other factors that influence profit margins.

The Sterling Beef Profit Tracker for the week ending May 14:

• Average feedyard margins: $69.91 per head.
• Average packer margins: -$26.30 per head.
• Sterling Profit Quotient: 204.1.

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