Cattle Economics

Without Expansion, The U.S. Beef Industry Is Unsustainable

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If you’re counting on beef and cattle for a future, or for the future of those coming behind you, the U. beef industry’s expansion plans matter greatly, as profit through attrition is unsustainable.

The problem with ignorance is that sooner or later it catches up to you. I’m not talking about innate stupidity or choosing to be intentionally obtuse. I’m talking about earnestly believing the sky is green, when in fact it’s blue, if the color is considered at all — even if the success of your business depends on it.

Cattle producers learned the hard way over the last decade that every false claim made by activists with an agenda must be challenged, no matter how ludicrous, fantastic or uncouth. Unchallenged, listeners with no knowledge assume it’s true.

The same goes for ridiculous claims made from within the industry.

That crosses my mind when some earnestly proclaim that closing the U.S. borders to beef exports and imports will somehow improve beef demand. Or when some clamor to outlaw the very alternative marketing arrangements that allow cattle prices to exist at a higher plane than they could otherwise. Or when folks champion legislation like mandatory country-of-origin labeling or the Renewable Fuels Standard, believing laws exist in a vacuum, unable to drastically and negatively affect markets in their wake.

The bottom linme for the U.S. beef industry is that profit through attrition is unsustainable.

“I just sold my calves for more money than I ever have in my life. Why do I care if the cowherd expands?” a producer asked me recently. This came during a discussion about the need for the U.S. cowherd to expand in the name of survival and future growth.

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On the surface, the response seems to smack of the capitalistic spirit that motivates self-interest, except that capitalism in its truest sense seeks to preserve those who ultimately determine their own success.

Yet, consider cow-calf producers who cuss order buyers paying less for their calves than they believe them to be worth. Consider cattle feeders who cuss the packer for the same perceived abuse. Too often, if considered at all, we think such animosity across sectors is just part of the business.

This dogma ignores the fact that each industry sector is both buyer and seller, supplier and customer. If packers can’t stay in business, they have no need for feedlots. If feedlots fold, they have no use for calves or feeders. If cow-calf producers close the gates, the fuel for the other sectors dries up.

Too often, we miss the fact that winning at someone else’s expense may be the same as us being unable to win in the future. Or, we take such basics for granted.

Just talk to cattle feeders in the areas served by the Cargill Meat Solutions Plainview, TX, packing plant that was shuttered last year. More recently, cattle feeders offered up an additional $9 million in incentives, trying to change the minds of National Beef Co. about closing the doors of its Brawley, CA, plant this spring. Ultimately, National decided that scant cattle numbers were just too much to overcome.

Lose enough packing and cattle-feeding capacity, and cattle prices get low enough to discourage herd expansion. Less herd expansion leads to less capacity, which leads to lower prices, etc.

Either you're on the spiral staircase heading up, or you’re on the one heading down. Reversing direction is plumb hard.

USDA’s recent report, Base Line Projections to 2023, estimates total per-capita red meat consumption to decline from 104.3 lbs. (retail weight) this year to 101.8 lbs. in 2023. Per-capita beef consumption is pegged at 56.5 lbs. this year and 52.1 lbs. in 2023. It was 79.2 lbs. in 1985.

During the same 10-year period, though, total per-capita consumption of red meat and poultry grows from 203.3 lbs. to 215.3 lbs. On average, best as I can tell, beef has never recovered any of the market share that it lost in the past 40 years.

If you’re counting on beef and cattle for a future, or for the future of those coming behind you, the industry’s expansion plans matter greatly.

 

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on Apr 8, 2014

The same goes for ridiculous claims made from within the industry. https://www.rebelmouse.com/ultimateherpesprotocolreview/

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What's Cattle Economics?

Wes Ishmael provides tightly focused analysis and commentary on specific beef quality and marketing issues of practical importance to beef producers.

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Wes Ishmael

Among the industry’s most insightful thinkers, Wes Ishmael concentrates on industry price and market perspectives for BEEF magazine. Along with his monthly “Cattle Economics” column...

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