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NCBA, R-CALF, COOL, USDA (No Politics!)
What gross profit are packers REALLY making?
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<blockquote data-quote="TerraceRidge" data-source="post: 1622814" data-attributes="member: 21599"><p>No, they're definitely not worthless. It's my understanding that the hide and offal is what's included in the drop credit. That averages out to $7.51/cwt based on live weight, according to this report: https://www.ams.usda.gov/mnreports/nw_ls444.txt</p><p></p><p>However, the fat and bones pose a great question. We know they're definitely not worthless, and they seem to be included in the boxed beef cutout value. Based on that, I think I may have run across how my calculations might be wrong. I've been looking at this document: https://www.ams.usda.gov/sites/default/files/media/USDADailyBoxedBeefReport.pdf</p><p></p><p>After looking over that, it seems like the boxed beef cutout value <em>includes</em> the value of the fat and bone. If that is true, I did not realize that. I thought that the term "boxed beef" referred to actual beef "in the box" that was sold on the wholesale market. Based on that document, though, it looks like the boxed beef cutout value (which is $253.75/cwt based on this report: https://www.ams.usda.gov/mnreports/lm_xb403.txt) must be multiplied by <em>the entire hanging weight</em> in order to calculate the total value of the carcass. Is this true? I was originally under the impression that the boxed beef cutout value was only multiplied by the <em>amount of total "yield" beef</em> in order to calculate the total value from a carcass.</p><p></p><p>Here's the most recent Sterling Beef Profit Tracker I could find: https://cdn.farmjournal.com/s3fs-public/inline-files/Beef%20tracker%20318.pdf. This must have been before the boxed beef cutout value spiked, because it was only $206.16/cwt that week. I did some calculations based on these numbers, and this is what I came up with:</p><p></p><p><a href="https://postimg.cc/m19RQkTC" target="_blank"><img src="https://i.postimg.cc/m19RQkTC/Profits-week-ending-March-13-2020.png" alt="" class="fr-fic fr-dii fr-draggable " style="" /></a></p><p></p><p>I'm still not quite sure what the numbers mean yet. The one thing that I noticed is that, apparently, the Sterling Beef Profit Tracker automatically indexes the weight of all slaughter cattle to 1360 lb, which throws off the dressing percentage. It's pretty confusing, but I don't like to just blindly accept the profits that the powers that be tell us are being made without at least trying to understand it. I do think that, as producers, we should make an effort to try to understand how the feedlot/packer side works since that is who is signing many of our checks (even if there are lots of middlemen out there).</p></blockquote><p></p>
[QUOTE="TerraceRidge, post: 1622814, member: 21599"] No, they're definitely not worthless. It's my understanding that the hide and offal is what's included in the drop credit. That averages out to $7.51/cwt based on live weight, according to this report: https://www.ams.usda.gov/mnreports/nw_ls444.txt However, the fat and bones pose a great question. We know they're definitely not worthless, and they seem to be included in the boxed beef cutout value. Based on that, I think I may have run across how my calculations might be wrong. I've been looking at this document: https://www.ams.usda.gov/sites/default/files/media/USDADailyBoxedBeefReport.pdf After looking over that, it seems like the boxed beef cutout value [i]includes[/i] the value of the fat and bone. If that is true, I did not realize that. I thought that the term "boxed beef" referred to actual beef "in the box" that was sold on the wholesale market. Based on that document, though, it looks like the boxed beef cutout value (which is $253.75/cwt based on this report: https://www.ams.usda.gov/mnreports/lm_xb403.txt) must be multiplied by [i]the entire hanging weight[/i] in order to calculate the total value of the carcass. Is this true? I was originally under the impression that the boxed beef cutout value was only multiplied by the [i]amount of total "yield" beef[/i] in order to calculate the total value from a carcass. Here's the most recent Sterling Beef Profit Tracker I could find: https://cdn.farmjournal.com/s3fs-public/inline-files/Beef%20tracker%20318.pdf. This must have been before the boxed beef cutout value spiked, because it was only $206.16/cwt that week. I did some calculations based on these numbers, and this is what I came up with: [url=https://postimg.cc/m19RQkTC][img]https://i.postimg.cc/m19RQkTC/Profits-week-ending-March-13-2020.png[/img][/url] I'm still not quite sure what the numbers mean yet. The one thing that I noticed is that, apparently, the Sterling Beef Profit Tracker automatically indexes the weight of all slaughter cattle to 1360 lb, which throws off the dressing percentage. It's pretty confusing, but I don't like to just blindly accept the profits that the powers that be tell us are being made without at least trying to understand it. I do think that, as producers, we should make an effort to try to understand how the feedlot/packer side works since that is who is signing many of our checks (even if there are lots of middlemen out there). [/QUOTE]
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What gross profit are packers REALLY making?
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