Revenue growth is essential to garner new expansion opportunities for any business and/or industry (often referenced as “top-line growth” given that revenue is always at the very top of the income statement). Revenue available to the production sector begins at the feedyard, and subsequently flows back upstream to stockers, backgrounders and cow-calf producers. It should be noted that revenue should NOT be confused with profitability. Rather, it’s simply an indicator of total dollars available within the business.
Breaking It Down: High-Profit Vs. Low-Profit Beef Producers
Total feedyard revenue is a function of three factors: live weight, number of cattle marketed, and the overall market. Revenue declined in 2009 on the heels of the financial crisis and weaker markets. However, it has surged nearly 50% since then. The overall estimate for 2012 establishes a new record and exceeds $35 billion.
However, any number of factors could potentially impact that in 2013 including tighter cattle supply, overhead resistance in the live market, and potential for continued high corn prices (thus limiting weight of feedyard sales). That has some significant connotations for the industry – especially around infrastructure and supporting industries around the production sector. How do you see this trend playing out in 2013? Leave your thoughts in the comments section below.
