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Profit Tracker: Packer Margins Double

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Beef packers used their leverage last week to reduce cash cattle prices and increase their margins, but overall it was a banner week for both feeders and packers. Cattle feeding margins declined $53 per head, but average profits remained more than $536. Packers were able to boost their margins $62 per head to an average of $125 for each animal processed, according to the Sterling Beef Profit Tracker.

The 5-area average price dipped $8 to $136.40 per cwt, but break-evens of $97.64 left feeders with their 25th consecutive week of profitability. Packer margins were padded by an $11 jump in the beef cutout to $240.74 per cwt, compared to $229.41 the previous week.The Beef and Pork Profit Trackers are calculated by Sterling Marketing, Vale, Ore.

The cost of finishing a steer last week was calculated at $1,360 per head, which is $281 less than the $1,641 a year ago.

A month ago cattle feeders were earning $442 per head, while a year ago profits were calculated at $208 per head. Feeder cattle represent 74% of the cost of finishing a steer, compared to 76% last year.

Farrow-to-finish pork producers earned $26 profit per hog last week, a $13 improvement from last week. A month ago farrow-to-finish pork producers showed a profit of about $3 per head.

Pork packers saw their margins decrease $4 to $17 per head. Negotiated prices for lean hogs were $71.37 per cwt last week, about $6.75 per cwt. higher. Cash prices for fed cattle are $3 per cwt. higher than last year and prices for lean hogs are about $5 per cwt. lower.

Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2017 will average $92 per cow. That would be $85 per head less than the estimated average profit of $177 for 2016. Estimated average cow-calf margins were $438 per cow in 2015.

For feedyards, Nalivka projects an average profit of $210 per head in 2017, which compares favorably with average losses of $4.25 per head in 2016. Nalivka expects packer margins to average about $24 per head in 2017, down from $114 in 2016.

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