In this file:
· US: Packer/Feeder Margin Spread Now Exceeds $600 Per Head
· Canada: Beef Market Update: Despite a positive basis, Canadian prices still off break-even levels
Packer/Feeder Margin Spread Now Exceeds $600 Per Head
Feedyard losses exceeded $200 per head last week
Greg Henderson, FarmJournal's Pork
September 18, 2019
Losses continued to grow for feedyards and the spread between feeder losses and packer profits only widened with a $1.50 per cwt. decline in cash cattle prices last week.
Packers bought the few cattle they needed at an average of $100.70 per cwt., leaving feedyard margins at a negative $203 per head. Packer margins held mostly steady at a historic $415 per head, leaving the spread between feeder losses and packer profits at $618, according to the Sterling Beef Profit Tracker.
The same week a year ago Sterling estimated feedyard profits of $38 per head while packer profits were $205, leaving a spread of $167 per head between the two.
(Note: The Beef and Pork Profit Trackers are intended only as a benchmark for the average cash costs of feeding cattle and hogs.)
Feeder cattle represent 73% of the cost of finishing a steer compared to 71% a year ago.
The Beef and Pork Profit Trackers are calculated by Sterling Marketing Inc., Vale, Ore.
Farrow-to-finish pork producers saw their margins decline $13 per head with average losses of $21. Lean carcass prices traded at $49.73 per cwt., $6.98 per cwt. lower than the previous week. A year ago pork producer margins were negative $30 per head. Pork packers saw average profits of $35 per head, $10 more than the previous week.
Sterling Marketing president John Nalivka projects cash profit margins for cow-calf producers in 2019 will average $138 per cow. That would be 14%...
more, including links to Sterling Beef & Pork Profit Trackers
Beef Market Update: Despite a positive basis, Canadian prices still off break-even levels
September 18, 2019
Beef markets are struggling for reasons beyond the usual annual low, as they search for information on when Tyson’s Kansas plant will be back up and running.
South of the border, markets have continued lower for the last six weeks, with cut-outs backing off (but still way over a year ago), due to perceived disruption on supplies, says Gateway Livestock’s Anne Wasko.
“[We] continue to see price pressure on local western Canadian and eastern Canadian markets as well,” says Wasko. “So here in Western Canada we saw our fat cattle prices drop $3 to $4 last week over the previous week. That brings our Alberta fed steer average down into that 136.5 area – that’s well off break-evens if you weren’t hedged, or insured, or forward contracted.”
As tough as it sounds, Wasko says, we are still trading above the U.S., with a positive $5 basis.
But, there’s a timeline for changes in the U.S., with Tyson looking to rebuild and be back up-and-running by January. In the meantime, logistics are a little complicated, with cattle being shipped to other plants, where they are running extra shifts, and Saturday kill shifts.
“Everybody’s wondering how long can that last – how long can we keep running six day kills, making up for this additional slaughter, moving cattle around – transportation costs money…,” says Wasko.
With the caveat that nothing is for sure, Wasko says it looks like live cattle futures signalled a bottom last week in the U.S. They were down into the 94 cent area, but crawled back to 98 cents.
“It doesn’t necessarily mean the cash is going to follow suit…but at least the market’s feeling better about maybe it’s gone as low as it needs to go given this news around the fire.”
Looking to lean hog futures, hints of China making amends with some Canadian agricultural products have had a positive impact.
“The market liked that kind of talk,” says Wasko, “so you just saw the December lean hog futures go from 58 to 68 U.S. through the week.”
Wasko says the underlying direction from the increase is also impacted by the movement in Chinese hog prices, due to African Swine Fever.
Feeder cattle sales volumes are starting to pick up...