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Conflicting beef data have USDA analysts scratching their heads
Story Date: 2/21/2012
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Source: Rita Jane Gabbett, MEATINGPLACE, 2/20/12
“Mixed Signals Cloud Beef’s Future” headlines USDA’s analysis of the beef situation in its most recent Livestock, Dairy and Poultry Outlook report in which it presents conflicting data on everything from processor excess capacity to beef herd expansion.
Capacity
Some analysts have alluded to excess capacity in feedlots and packinghouses as a major cause of the negative margins. The negative margins for cattle feeding and feedyard closures in New Mexico and the Southern Plains, for example, and the apparent reduction in cattle feeding in lots of less than 1,000 head tend to support the notion of excess capacity. However, the expansion of larger feedlots contradicts that notion, according to USDA.
The notion of excess meat packing capacity is similarly characterized by conflicting information about packinghouse closures and openings. For example, the news of a refurbished beef packing plant in Tama, Iowa comes at the same time there is further evidence of excess capacity in observations of $100 per carcass losses, reduced kills, and reduced hours of operation, the report noted.
USDA also pointed out that small, custom-slaughter facilities appear to be struggling to keep up with more local cattle slaughter and processing of “natural” beef and organic beef. Scanner data shows the retail share of natural and organic all-fresh-beef sales has increased to 4.2 percent in the first quarter of 2011 from 1.1 percent in 2003.
Cattle herd expansion
While USDA’s January Cattle Inventory report showed about 37,300 more heifers are expected to calve in 2012, the analysts in this more recent report questioned whether that data really pointed to cow herd expansion.
“A year over year decline of 967,000 beef cows (offset by a 1 percent increase in dairy cows) is not likely to be offset by 37,300 more calving replacement heifers, especially following large declines the previous year,” the analysts wrote. “Despite a very positive outlook form the cow-calf producers’ perspective, it is not clear that larger cattle inventories are in fact economically sustainable from an overall industry profit perspective.”
The report also suggested that even though retail beef prices are at record levels, that might not be enough to provide the long-term margins and profits the wholesale and cattle feeding sectors must have in order to sustains expansion. It noted that both cattle feeders and packers have absorbed negative margins for most of 2011 and so far in 2012.
To view the full report, click here.
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