Earnings season is upon us. And readers who follow publicly-traded companies know that analysts closely watch “topline” performance; the revenue trend for a company or across an industry indicates the relative strength of its pricing power over time and whether or not a company or industry has been able to experience growth.
As such, revenue growth trends are important to all industries and companies. If the trends are negative, it’s likely a sign of competitive weakness; conversely, if the trend is positive, it provides opportunity for new growth and expansion. Keep in mind, however, that revenue does not portend earnings – or profits – and should not be interpreted as such.
All of that holds true for the beef industry, too. 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, the number of fed steers and heifers marketed and the live market. Annual feedyard revenue peaked in 2014 at $42.2 billion – last year’s stronger market coupled with heavier weights propelled the measure to a new record.
The first half of 2015 also marked a new record: feedyard revenue grew $21.4 billion through June – a $1 billion year-over-year increase. Weekly harvest and beef production levels have been running about 6% and 4% behind last year’s pace, respectively. However, the market has more than compensated: the 2015 fed market averaged $160+ per cwt through June versus last year’s $147 mark—resulting in more total dollars coming into the business.
The pressing question now hinges around the general direction of the market during the back half of 2015. Where do you see the market headed for the remainder of the year? How do you perceive the overall revenue trend shaping up for 2015 compared with 2014 on an annualized basis? Can the feedyard sector partially compensate for a softer market with even heavier weights through the rest of the year?
Leave your thoughts in the comments section below.
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