News

Cattle producers might be slowly gaining leverage over the packing industry

A livestock economist says he’s optimistic about the outlook for the U.S. cattle industry.

Don Close with Rabo AgriFinance says contraction in the cattle herd and the added processing capacity helps. “If you take the two years it takes to get new construction up and running, we will see increasing slaughter capacity come into the market at the very time our cattle supply is contracting and that is what is going to drive that price leverage in favor of producers.”

He tells Brownfield the industry added 6 million head from 2014 to 2019 but didn’t increase slaughter capacity, which benefited the nation’s meat processors. “It was the rebuild and the escalation and the numbers that caused this whole leverage balance to shift so favorably and it was only exacerbated with the whole COVID and labor issues.”

While the additional slaughter capacity helps increase competition in the markets, Close says those facilities don’t have an easy road ahead, and it will be a challenge get online and stay profitable.

Close spoke with Brownfield at the Nebraska Cattlemen’s Convention.