How do they do it? Packers paid $3 to $4 per cwt more for cattle last week and their margins went up $20 per head. Packer margins for the week ended Dec. 23 averaged $150 per head, according to the Beef Profit Tracker. It was a good week for cattle feeders, too, as their margins more than doubled to $135 per head.
Cash fed cattle jumped from $111.74 to $115.37 per cwt. last week as packers turned aggressive late in the week. The supplies of ready cattle do not appear burdensome to the market at this point. This week cattle feeders will try to extend the rally, with early-week asking prices of $120.
The incentive for packers to pay up last week came from increases in the Choice cutout price and the drop credit. The beef cutout increased nearly $6 per cwt. to $195.12, and the drop credit rose $1.84 per cwt.
The total cost of finishing a steer last week was $1,471 compared to $1,487 the previous week and $2,131 last year. The Beef and Pork Profit Trackers are calculated by Sterling Marketing, Vale, Ore.
A month ago cattle feeders were earning $52 per head, while a year ago losses were calculated at $413 per head. Feeder cattle represent 75% of the cost of finishing a steer, compared to 80% last year.
Farrow-to-finish pork producers lost $8 per hog last week, about $3 more than the week before. A month ago farrow-to-finish pork producers lost about $33 per head.
Pork packers saw their margins improve $9 per head to $45. Negotiated prices for lean hogs were $54.68 per cwt. last week, about $1 per cwt. lower. Cash prices for fed cattle are $8 per cwt. lower than last year and prices for lean hogs are about $3 higher than last year.
Sterling Marketing president John Nalivka projects average cash profit margins for cow-calf producers at $144 per cow this year. In 2017, Nalivka projects cow-calf losses of $24. Last year’s estimated average cow-calf margins were $432 per cow.