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October 2, 2019
During the past several weeks, this column has addressed potential inclusion of mandatory country of origin labeling (MCOOL) as part of the new USMCA (U.S., Mexico, Canada) trade agreement (often referenced as NAFTA 2.0). Those columns have focused on 1: meat demand, and 2: feeder cattle prices in the U.S. vs. Canada in reference to MCOOL, respectively.
However, interest in COOL has seemingly ramped up even more in recent weeks following the fire in Tyson’s Holcomb, KS beef plant. The #FairCattleMarkets campaign on Twitter is largely in response to the widening live-to-cutout spread since the fire. And as part of that campaign, COOL has been repeatedly referenced as an item that’s important to the beef industry’s profitability.
To that end, this week’s graph provides a look at annual feedyard profitability since 2000. Annual averages are provided in the illustration for the following years:
2000 to 2008
2009 to 2015 (MCOOL years)
2016 to 2018
Profitability averages are $-27, $-15, and $+22 per head, for the three periods outlined, respectively.
In other words, the best period of profitability at the feedyard level has occurred since MCOOL was repealed (2016 to 2018). And without 2014’s huge boost for profitability, the average return for cattle feeders while MCOOL was in effect would have been $-64 per head—far and away the worst of the three periods.
That brings us back to the #FairCattleMarkets campaign. There’s seemingly some confounding of topics with respect to the live to cutout spread, profit, and COOL. In summary, based on the data, at best it would seem COOL was NOT an influential factor in driving feedyard profitability.
Therefore, there were no extra dollars derived from COOL to make their way back upstream; COOL didn’t contribute to the favorable margins cow-calf operators experienced in ’13, ’14, and ’15.
One final note on the merging of these topics: Given current concern about the live to cutout spread and industry profitability, it’s important to note the live to cutout spread also has not historically been an important influence on profitability at the cow-calf level. For more on that see: Packer gross margins vs cow/calf profitability.
Leave your thoughts in the comments section below.
Speer serves as an industry consultant and is based in Bowling Green, Ky. Contact him at [email protected]
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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