Higher Beef Costs Loom as Feeder Cattle Futures Extend Rally

Feeder cattle futures have soared to record highs and are poised for their biggest rally not seen since 1992. Beef prices are already at their highest ever, but with US ranchers sending fewer animals to slaughter, it can only mean higher costs for beef looming.

Recent USDA data shows the domestic feedlot-herd at this time last month actually shrank one-sixth of 1% from the same period as last year. Furthermore, for this past first-quarter, meat-packers processed 7% fewer heifers versus the same period as last year partially due in part by producers holding back more animals for herd-expansion purposes (which can take as long as three years).

Laura Taylor, a senior commodities broker at RJO Futures in Chicago, had this to say regarding the current feeder cattle futures situation, “The feeder cattle market has hit consecutive record highs this week, supported by a recent inventory report that indicated a smaller than expected number of calves and lighter-weight animals on-feed.”

The trend for feeder cattle futures is up with no top yet in sight. I made a big mistake exiting feeder cattle futures on Monday when I saw the market unable to retain it’s gains. I will need some type of pull-back before reinitiating another long position.

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