CHICAGO – 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, analysts and traders said on Thursday.
The losses could cause beef companies like industry leaders Tyson Foods Inc (TSN.N) and JBS USA, a unit of Brazilian company JBS SA (JBSS3.SA), to cut back on the number of cattle they slaughter, which could eventually lead to higher retail beef prices, analysts said.
"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.
The problem for these beef companies is that with unemployment topping 9 percent in the United States, they have been unable to fully pass on higher costs for the raw materials to consumers for fear of choking demand for beef or causing consumers to switch to lower-cost meats, such as chicken.
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