Total revenue coming into the feedyard sector is an important measure for the beef industry. The measure represents dollars available for the feedlot sector; but equally important, that money ultimately gets passed upstream to the stocker and cow-calf sector as feedyards buy feeder cattle. Keep in mind that revenue does NOT represent profitability – rather, it is simply a measure of income generated from business activities.
Feedyard revenue is a fairly reliable indicator of the amount of money flowing into the production sector. It’s a function of three key components:
- live weight
- number of fed steers and heifers marketed
- the live market
Annual feedyard revenue peaked in 2014 at $42.2 billion – a stronger market coupled with heavier weights propelled the measure to a new record. And from a broader perspective, the beef industry has enjoyed a five-year run of better revenue. Bigger weights and higher prices meant more dollars coming into the industry between 2010 and 2014.
That changed in 2015.The first half of 2015 was trending in a favorable direction, establishing a new record of approximately $21.4 billion through June, about $1 billion better than 2014. But all that came to a halt in the second half of 2015: July through December generated nearly $3.7 billion less versus the prior year to end the year at approximately $39.5 billion, versus $42.2 billion in 2014.
Industries or businesses that experience revenue growth typically enjoy new opportunities for growth or expansion. Conversely, declining revenue requires more careful management of expenses and evaluation of various enterprises associated with the business. That has important implications not only for cattle producers but for all other support industries associated with the beef complex.
How do you see the revenue trend for 2016? Will there be some stability – or will there be continued declines in total dollars coming into the industry? Whatever your perception, how will it influence the industry in the coming year(s)?
Leave your thoughts in the comment section below.
Nevil Speer is based in Bowling Green, Ky., and serves as vice president of U.S. operations for AgriClear, Inc. – a wholly-owned subsidiary of TMX Group Limited. The views and opinions of the author expressed herein do not necessarily state or reflect those of the TMX Group Limited and Natural Gas Exchange Inc.
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