Record prices for young cattle and a jump in feed costs could squeeze producers unless consumers are willing to stomach higher beef prices.
Futures prices for young cattle, known as feeders, have surged to near all-time highs in recent weeks amid tight supplies and strong demand. Prices for corn and soybeans used for feed have climbed as well, hitting more than two-year highs last month. Yet futures prices for live, or slaughter-ready, cattle may not keep pace.
The dynamic could pressure feedlot owners who buy feeder cattle and fatten them for slaughter. After posting strong returns this year, producers as early as the first quarter of next year could face a loss for each head of cattle. Meat packers also could be squeezed if they are forced to operate at less than full capacity if fewer cattle are available.
"Somebody will get squeezed out eventually by the higher prices," said Randy Fisher, president of Fisher Commodity Services in Garden City, KS.
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