CHICAGO Jan 21 Some U.S. beef packers are
reaping their best profits in 2 1/2-years after the price for
beef that they sell to grocers and restaurants hit historic
highs, analysts and economists said.
Margins for beef processors such as Tyson Foods and
Cargill Inc will continue to widen as long as they are
able to pass on their costs for record-high cattle prices to
wholesale buyers, they said.
"This is the time of year when packer margins are always
narrowest because of seasonally tight supplies. So, this has
been a bit of a pleasant surprise for packers after two weeks of
ratcheting up wholesale beef prices," said Jim Robb, director of
the Denver-based Livestock Information Center.
On Tuesday, U.S. beef packers, on average, earned an
estimated $102.85 per head of cattle processed, according to the
Colorado-based analytics firm HedgersEdge.
It was the first time processors saw triple-digit returns
since June 2011 at $104.10, said the firm's analyst Bob Wilson.
Beef prices climbed after years of drought in the United
States shrunk the herd to its lowest level in more than 60
years. Recently, cattle and beef became increasingly scarce
after packing plants shut down during the Christmas and New
And, retailers were caught short of product while they
replenished coolers as colder weather settled in across the U.S.
Plains, which slowed down animal weight gains.
In response, packers last week paid up to $144 per
hundredweight (cwt) for cattle, an all-time high, feedlot
Tuesday afternoon's wholesale choice beef price was $239.72
per (cwt), leaping $3.16 from Monday to its ninth consecutive
record, according to U.S. Department of Agriculture data.
Select cuts captured their 13th straight record after
surging $2.70 in price to $237.15.
It is unprecedented that cash (or slaughter-ready), cattle,
beef prices and margins are at current levels, said Don Roose,
president of Des Moines-Iowa brokerage U.S. Commodities.
Packers are doing everything in their power to push up beef
prices, and it is working in the short term, he said.
"The question becomes whether processors will win the
battle, but loose the war. Overall, there is concern about the
loss of demand at these price levels, which will be key," Roose