Market Morsel: A slow grind for processors

Market Morsel

The Episode3 beef processor margin model for April 2021 shows a slight improvement for processor bottom lines, but the model still suggests average losses over the month in excess of $300 per head of animal slaughtered.

The April 2021 monthly average margin came in at $308, down from a $318 per head loss during March. Since the shocker start to the season where January margins were calculated at a $339 per head loss, the current negative margin has narrowed by 9%. On an annual basis the processor margin sits at a loss of $323 per head.

Assisting beef processors over April were improved beef export prices, particularly in the USA with average pricing here improving by 8% over the month. Similarly, average co-product prices improved by 5% and the net result of both of these favourable price moves for processors was to increase their share of revenues.

Wage and utility costs were also reduced by nearly 2%, helping processor to save a few extra coins. However, domestic cattle prices remained strong, particularly for young/store cattle, with the Eastern Young Cattle Indicator making a new high of 910c/kg cwt during April. The robust domestic cattle prices and ongoing tight supply the key factors that are keeping processor bottom lines under pressure.