A month-to-month column written for Beef Central by US meat and livestock market commentator Steve Kay, writer of US Cattle Consumers Weekly
THE query on this month’s column headline displays essentially the most pertinent situation going through the US beef trade at current.
That’s as a result of the US cattle herd on January 1 had shrunk to its lowest stage since 1951. A fifth yr of herd liquidation meant the January 1 complete for cattle and calves was 87.157 million head, down 1.9 p.c or 1.684 million head from the yr earlier than.
But there are nonetheless no indicators that herd rebuilding is about to start out.
The present numbers and chance of even smaller numbers for one more 18 months have a number of penalties, nearly all of them unfavourable.
US ranchers will proceed to obtain document or near-record costs for his or her calves and yearlings. However they received’t be making enormous margins as their working prices will stay extraordinarily excessive.
US cattle feeders will battle to earn money due to the shrinking provide of cattle outdoors feedlots and the excessive costs. HedgersEdge.com estimates that the surface provide on July 1 was down 926,000 head from the prior yr.
Processors dropping cash
Fewer cattle implies that US beef processors have misplaced cash most weeks this yr. There may be rising discuss various vegetation being compelled to shut if the meat herd doesn’t begin to develop till subsequent yr.
This additionally begs the query of the place will brand-new vegetation which can be being constructed or proposed get their cattle from? Not less than eight new vegetation are within the works, with an avowed slaughter capability of greater than 9000 head per day.
I’ve my doubts that a lot of this proposed new capability will come to fruition. The trade already has surplus capability. I calculate that the 76 largest US beef vegetation, starting from 7000 per day of capability, down to twenty/day, have a mixed capability of 135,330 head per day.
But the US trade has seldom seen day by day slaughter totals this yr above 125,000 head. In different phrases, processing capability utilisation is just simply above 90pc, and that’s solely on a five-day foundation. Saturday kills are nearly non-existent.
Federal Authorities pledges one other US$110m in help
USDA in the meantime continues to pledge tens of millions of {dollars} in federal grants to small and impartial meat processors. The aim is to assist the businesses broaden their capacities in an effort to extend competitors within the meat trade and to provide farmers extra choices, it says.
Its newest pledges complete US$110 million (A$164m) and vary in worth from US$123,000 for a small customized meat store in Washington state to US$10 million for an enlargement of a brand new producer-owned beef plant in Texas that plans to make use of 1500 folks.
The grant awards to greater than 50 US meat and poultry processors are supposed to assist alleviate the trade’s consolidation over many years that has at occasions decreased earnings for farmers and elevated costs for customers, says Agriculture Secretary Tom Vilsack.
Right here’s a fast abstract of a few of the beneficiaries.
The Texas plant is Producer Owned Beef (POB) and is a brand new beef harvest and processing plant close to Amarillo, Texas. Its aim is to extend cattle processing capability and competitors and distribute plant earnings to producer homeowners, who will reinvest of their companies and communities, says USDA.
POB will primarily serve the area of Texas, Oklahoma and New Mexico, which ranks primary nationally in cattle on feed capability however third largest in fed cattle processing capability.
USDA funds might be used to help the acquisition of the power’s gear as a part of POB’s effort to considerably enhance regional processing capability by 15pc and nationwide capability by 3pc. It expects to serve 250 cattle producers and create greater than 1500 new full-time jobs, says USDA.
Noah’s Ark Processors LLC will even obtain US$10 million from USDA. It’s based mostly in Hastings, Nebraska, and is one in every of three kosher beef distributors within the nation.
With help from USDA, it’s going to double its cattle slaughter and processing capability by increasing its facility and processing ground, says USDA. This enlargement will enable Noah’s Ark Processors to serve an extra 54 producers whereas absolutely assembly the home and worldwide demand for kosher beef. This challenge is predicted to create 40 new jobs.
North State Processing LLC in North Carolina will even obtain US$10M. It’s a new processing firm created by native and skilled producers aimed toward offering processing capability to small and medium impartial producers. Utilising USDA funds, North State Processing will assemble a brand new USDA-inspected facility targeted on cattle, ostrich, emu, water buffalo and alpaca processing in Hamlet, North Conn. It anticipates serving 37 producers and creating 54 new full-time jobs, says USDA.
Solely the Texas plant might be massive sufficient to considerably enhance the day by day capability, because it proposes to reap 3000 head per day. However the enhance in capability at different vegetation will undoubtedly imply that competitors for cattle, even in smaller areas, will enhance.
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