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Beef margin outlook for 2012 isn’t pretty
Story Date: 3/1/2012
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Source: Rita Jane Gabbett, MEATINGPLACE, 2/29/12
As cattle and beef prices continue to rise, feedlot operator, beef processor and retailer margins are suffering and the numbers for 2012 don’t look good, according to Oklahoma State University Extension Livestock Marketing Specialist Derrell Peel.
In a comprehensive analysis of the situation in this week’s Cow Calf Corner newsletter, Peel explained that even as prices escalate dramatically through the steer-to-steak continuum, it would be very difficult for feedlots and processors to cover their costs.
Processors
For example, boxed beef prices rose 16 percent in 2011, but the prices processors paid for fed cattle rose by 20 percent. So far in 2012, boxed beef prices have risen about 10 percent while fed cattle prices are up 16 percent, “meaning that the squeeze continues,” according to Peel.
“Given projected feedlot breakeven values, it would take a more than 20 percent increase in boxed beef prices in 2012 to cover both feedlot and packer break-evens,” wrote Peel. “This seems unlikely and these two sectors are likely to continue jockeying to limit poor margins.”
Feedlot operators have their own problems. Even as fed cattle prices rose 20 percent, their grain costs rose 35 percent last year. Peel said those poor margins would continue “through much of 2012.”
Retailers
Retail margins aren’t anything to cheer about either. Retail beef prices rose about 10 percent in 2011, compared to the 16 percent increase in boxed beef prices.
“Given the boxed beef price increases described above, it would take something like a 25 percent increase in retail beef prices to cover feedlot and packer break-evens and allow for a typical retail margin,” Peel wrote. “Current projections for decreased per capita beef supplies suggest that an 8-10 percent retail price increase is more feasible. The heat from this pressure cooker will likely get hotter before it gets better.”
For more stories, go to http://www.meatingplace.com/.
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