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Estimates of feedyard revenue serve as an indicator of the total dollars available within the business.
January 16, 2014
Keeping track of top-line growth is important to all businesses. Revenue growth – or the lack of it – is indicative of new money coming into the enterprise. In the absence of revenue expansion, it’s difficult to keep up with inflation, invest back into the business and/or establish new expansion opportunities. And most certainly, negative revenue trends portend declining competitiveness and the need to reduce costs to ensure profitability.
Revenue available to the beef industry’s production sector begins within the feeding sector and ultimately works its way back into the various sectors associated with producing cattle ahead of the feedlot. As such, estimates of feedyard revenue serve as an indicator of total dollars available within the business. And as noted above, it’s important to note that revenue should NEVER be confused with profitability.
Total feedyard revenue is a function of three factors: live weight, number of cattle marketed and the overall market. 2013 revenue will establish a new record eclipsing $36 billion coming into the live sector of the beef business. That’s a sharp improvement vs. 1998 – just 15 years ago – when beef demand bottomed out. More dramatic, though, is the sharp jump just since 2009 when the financial crisis put renewed pressure on the market.
Even in the light of tighter supply, and declining production, the industry has managed to maintain pricing power and generate positive revenue trends. While profitability has been especially challenging for margin producers, the trend is certainly positive for the industry as a whole (imagine how difficult this might be if the trend were working the other way).
How do you see this trending for 2014 and the years ahead? What role has improved beef quality and consistency played in this overall trend? At what point might both domestic and international consumers push back against higher prices? Leave your thoughts in the comments section below.
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Nevil Speer serves as an industry consultant and is based in Bowling Green, KY.
Nevil Speer has extensive experience and involvement with the livestock and food industry including various service and consultation projects spanning such issues as market competition, business and economic implications of agroterrorism, animal identification, assessment of price risk and market volatility on the producer segment, and usage of antibiotics in animal agriculture.
Dr. Speer writes about many aspects regarding agriculture and the food industry with regular contribution to BEEF and Feedstuffs. He’s also written several influential industry white papers dealing with issues such as changing business dynamics in the beef complex, producer decision-making, and country-of-origin labeling.
He serves as a member of the Board of Directors for the National Institute for Animal Agriculture.
Dr. Speer holds both a PhD in Animal Science and a Master’s degree in Business Administration.
Contact him at [email protected].
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