Struggling US beef industry sees profits again

 

 

US beef prices have surged this month due to tight supplies, strong exports, and an uptick in consumer demand, producing badly needed profits for US beef companies and cattle producers.

 

The wholesale price for choice-grade beef, which is often served in restaurants, is the highest in nearly two years at US$163 per hundredweight.

 

"The supply side is so tight that any inkling of demand improvement sends prices higher," said Jim Robb, economist at the Livestock Marketing Information Centre.

 

This has been good news for beef companies like Tyson Foods Inc, Cargill Inc, JBS-US and National Beef Packing Co.

 

According to reports, beef companies, on average, will earn about US$54 profit on every head of cattle they process, compared with about US$14 on March 1.

 

The higher beef prices quickly filtered down to feedlots, where beef companies this week paid US$97 per hundredweight for cattle, the highest in nearly two years, and netted producers US$120-150 profit on each steer and heifer.

 

This prosperity has had investors pouring money into CME cattle futures, where open interest, a measure of use, has been record large and the April contract 2LCJ0 hit a 17-month high of 98.70 cents per lb.

 

This recovery in beef and cattle prices have helped cattle producers who had been losing money for nearly two years due to high feed and fuel costs and the slowdown in beef sales during the recession.

 

Beef and cattle prices should not move much higher, but they may not drop significantly as beef demand should stay strong with the spring cookout season fast approaching, while supplies remain tight, economists said.

 

The two-year old economic recession slowed meat sales in supermarkets and restaurants as consumers, many of whom remain out of work, shifted to preparing lower-cost meals at home.

 

While that trend largely continues, economists are seeing signs business may be improving for beef.

 

A Chicago-based meat economist said beef sales to Russia last week was partly responsible for the spike in beef prices. USDA on Thursday reported Russia was the largest overseas buyer of US beef last week taking 3,500 tonnes.