Revenue growth is important to all industries and business, as it’s essential to providing opportunities for expansion. Stagnant and/or declining revenue forces enterprises to hunker down into survival mode; it often forces businesses to carefully evaluate how and where resources are being utilized – looking for places to cut spending.
Moreover, in the absence of revenue expansion, it’s impossible to keep up with rising costs and invest back into the business to improve efficiencies. Most importantly, negative revenue trends portend declining competitiveness.
For the beef industry, production-sector revenue begins at the feedyard and works its way back downstream to stocker and cow-calf operations. Therefore, a snapshot of feedyard revenue also provides some indication of available revenue to their respective suppliers. That said, revenue growth (topline growth) should never be confused with profitability (bottom-line assessment).
Nevertheless, feedyard revenue is a function of three key factors – live weight, number of cattle marketed, and the price at which they’re sold. The 2014 market, coupled with heavier cattle, caused feedyard revenue to surge nearly 18% last year and surpassed $40 billion annually. Moreover, generated revenue has jumped 80% during the past five years compared to 2009’s $23.4 billion estimate.
Looking forward, profitability will be especially challenging for margin producers. However, the beef industry’s success in 2014 in generating revenue growth can’t be overlooked. Primarily, it’s indicative of stronger consumer demand and robust pricing power (all of which is highly important to the overall market).
Given the market’s run in 2014 and the recent setback, how do you foresee revenue trends for 2015? Where do you see the ultimate revenue number ending up for 2015? Can the feedyard sector partially compensate for a softer market with even heavier weights yet in the coming year? How far can retail beef prices run to support the market at higher levels going forward? Leave your thoughts in the comments section below.
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