NCBA Convention: Feeding Losses, Industry Contraction Hitting US Beef

US - Deep financial losses for cattle feedlots last year and a decline in packer capacity are changing the U.S. beef industry, writes Roy Leidahl for TheCattleSite.
calendar icon 29 January 2009
clock icon 2 minute read

The country's cow-calf beef segment, which has already been declining, produced the smallest calf crop since 1951, said Mike Murphy, an economist with Cattle-Fax, at the 2009 Cattle Industry Annual Convention & NCBA Trade Show. However, U.S. feedlot capacity has held at about 33 million head since a long-term upward trend ended in 2004. Although feedlots have maintained their capacity, annual U.S. fed cattle slaughter has declined from about 30 million head in 2000 to fewer than 28,000 head last year.

“The feedlot losses of 2008 represent a risk for the beef industry,” Murphy told a 2009 Cattle Industry Annual Convention meeting that focused on the business of stockers, who buy calves from cow-calf operators for later sale to feedlots. When feedlots contract, “it will influence you as sellers of feeder cattle,” said Murphy.

Another challenge developed in recent years in the packing industry. Cattle-Fax estimates that packers made profits in all but one year from 1980 to 2004. Those profits ranged from a few dollars to more than $30 per head. However, packer profits tumbled to thin or negative from 2004 through 2007, before rebounding to more than $20 estimated for 2008.

Troy Applehans, another Cattle-Fax analyst, noted that during the past decade feedlot profits averaged near zero while packer profits averaged about $10 per had. However, in the same years, cow-calf operators made average profits of more than $90 per head while stockers earned about $45 pear head.

“Cow-calf and stocker operators will have to give some margin to the other two in the next several years,” said Applehans.

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