The aftershock of COVID-19 on the cattle industry has had a far-reaching impact on procurement, process, and merchandising. Analyst say that changes need to be made now to survive the post-pandemic world.
A rash of catastrophic events has hit the beef industry hard in the last year, including the fire at a Kansas beef processing plant and now COVID. Analyst say that the industry needs more meat packing capacity.
“From 2002-2019, the average percentage of fed steer prices, minus drop credit to comprehensive cutout, was about 55 percent,” according to animal protein analyst Dustin Aherin. “In 2016, the average for that year was about 54 percent. So, if the industry were to return to the leverage level of 2016, we would need to have about 5-6,000 head of daily packing capacity.”
Aherin says that the extra packing capacity can come from a variety of areas.
“Number one, it could come from technology at existing plants. Another potential would be smaller to medium sized plants that really specialize in niche markets, talking 1,000-2,000 head daily capacity...,” he notes. “We estimate about $100-120 million dollars of investment per 1,000 head of capacity, and we have to have enough capital to survive a full cattle cycle. If we start building a plant today, by the time that plant is up-and-running we are probably going to be in a tighter cattle supply situation.”
He warns that the cattle industry needs to be flexible to stay ahead of future changes: “The beef industry has really capitalized on a lot of successes over the last couple of decades. We’ve gained export market access, improved genetics and improved meat product quality, but we can’t simply rest on past successes. We have to really be focused on the consumer, being ready to innovate and be creative because it history is making changes and jumps, we don’t want to be caught flat-footed.”
NCBA on future beef market policies.
A closer look at the farm-to-retail price spread for beef and pork.
Cattlemen welcome legislation to improve meat processing capacity.