Investment funds have been piling into the cattle market, which is driving futures to new highs. This move comes despite recent news from the USDA that cattle herds are swelling, which could lead to a backlog of beef next year.
For consumers, this action could lead to unwelcome high prices at the store, but investor demand is great news for cattle producers who are looking at fat profit margins at current levels. Higher cattle prices and cheap corn (a major input cost for beef producers) are a welcome relief after months of unprofitable prices.
To fully capture the current profitability, producers can pre-buy their corn needs and pre-sell the cattle they’ll take to slaughter next year, locking in the current values through futures contracts, which stood at $3.48 per bushel and $1.20 per pound, respectively, on Friday, Oct. 27.
Alex Breitinger is associated with Breitinger & Sons LLC, a commodity futures brokerage firm