Cattle feeding recovery key to rebuilding beef industry
Structural shrinkage in the North American beef industry is expected to continue, perhaps even worsen in the near term, according to a new report from the Rabobank Food & Agribusiness Research and Advisory (FAR) group.
“It is a rare occurrence that all sectors within the cattle industry are profitable at the same,” says report author and Rabobank FAR group analyst Don Close. “However, before the U.S. cattle industry can begin to fully rebuild after several years of contraction, it is necessary for equity recovery to take place in the cattle feeding sector.”
The report, “North American Beef: The Liquidation Continues,” finds high feed prices and severe drought challenges have placed significant pressure on the industry in recent years. At the beginning of 2013, the market was optimistic that the industry could turn the corner and begin to grow again. However, the second half of the year is bringing a less optimistic view as the industry contracts and, as a result, is at risk of becoming a higher-priced luxury protein.
“A number of complex challenges, including growing price spreads between beef and alternative proteins, excess capacity along the supply chain and dwindling profitability along the chain, are contributing to the shrinkage,” notes Close. “Rabobank expects domestic beef supplies to continue to contract and the supply chain to continue restructuring, making a rebound in the beef industry unlikely in the near term.”
The industry has settled into a painful process of contraction, excess capacity and restructuring. As a result, consumers are seeing beef prices escalating. The spread is widening between beef and other protein sources, and people are not only downgrading between selected beef items, they are more frequently opting for the other proteins.
This report outlines how feeder supplies, contracting North American supplies and Mandatory Country of Origin Labeling legislation are contributing to the challenges faced by cattle feeders and processors.
The report, “North American Beef: The Liquidation Continues,” is available exclusively to clients of Rabobank and Rabo AgriFinance. Media can obtain the full report by contacting Sarah Kolell at Rabo Agri- Finance. — WLJ