U.S. beef packing companies are suffering the largest losses in 2-1/2 years as tight supplies of cattle have them paying near record high prices for them, Reuters reports. The losses could cause beef companies to cut back on the number of animals slaughtered, which would lead to higher retail beef prices.
"The cattle market ended last quarter with a bang. It was certainly a victory for the producer, but not for the packer whose margins are at their narrowest levels of the year," said Elaine Johnson, an analyst with CattleHedging.com.
On Thursday, beef packer margins tumbled to an estimated loss of $56.20 per head of cattle versus an $11.60 loss a week ago. The $56.20 is the largest loss since the negative $56.50 per head margin on April 7, 2009. CattleHedging.com reports that packers were making a profit of $69.35 as recently as August 25.
"Cattle producers haven't made much money in the past few years which shrunk the calf crop to its smallest since 1950. A big part of that has to do with high feed expenses for cattle," said University of Missouri livestock economist Ron Plain.