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Beef packer margins back in the black
Story Date: 5/2/2012
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Source: Rita Jane Gabbett, MEATINGPLACE, 5/1/12
Beef packers made on average $6.00 per head in the week ended April 27, compared to a loss of about $45.74 per head a week ago and a loss of $96.48 per head a month ago as cattle prices have eased and both cutout and by-product values rose, according to cattle industry analyst John Nalivka.
Nalivka, who calculates and publishes the weekly Sterling Beef Profit Tracker, told Meatingplace cutout values rose about $4.50 per hundredweight last week and the drop credit (by-product values) rose about $ $2.50 per head. Meanwhile the average price packers paid for cattle declined by about $2.50 per hundredweight.
Nalivka calculates an average cutout blending Select and Choice prices. He put that cutout average for last week at $189.11 per hundredweight, compared to $184.61 a week ago and $184.58 a month ago. He put the drop credit at $171.19 per head versus $168.67 per head a week ago and $168.28 per head a month ago.
Meanwhile, the cost of choice steers last week averaged $119 per hundredweight, compared to $121.15 a week ago and $124.69 a month ago.
Part of the equation, according to Nalivka, is that meat packers cut kills. He also noted that coming out of the Easter season and into grilling season, consumer demand typically improves.
“I was somewhat surprised we put that much on the cutout last week,” he said, noting that beef trim prices have rebounded as the market seems to have found its footing in the wake of reduced demand for lean finely texture beef (LFTB).
Improved prices for 50 percent trim helped boost packers’ bottom lines. Nalivka put the average price of 50 percent trim at about 87 cents per pound last week; up from 68 cents per pound the previous week and 53 cents per pound the week before that.
“Obviously the beef complex after LFTB and BSE still has a pretty firm foundation from the demand side,” said Nalivka, referring to the discovery last week of a 10-year-old dairy cow in California infected with an atypical case of bovine spongiform encephalopathy.
Nalivka predicted cattle prices would trade around $118 to $120 per hundredweight in the coming weeks. “If [packers] can hold the cutout or gain some, packers will be in pretty good shape over the next 60 days. If the price of cattle comes up and we don’t hold those cutout prices, then we are right back where we started. This market is still pretty tenuous.”
For more stories, go to http://www.meatingplace.com/.
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