Industry At A Glance: Feedlot, Packing Overcapacity

Industry At A Glance: Feedlot, Packing Overcapacity

Relative overcapacity has spurred rivalry in the industry in both the feedlot and processing sectors. Increased competition for cattle by feedyards and packers ultimately bites into margins over time. That trend is especially clear when considering the live-to-cutout/offal spread. The metric peaked in 2003/04 but has been on a steady decline since.

That trend reflects the necessity of rationalization in the processing sector (given the unlikely event of cowherd expansion anytime soon). How much capacity needs to be removed from the sector to reverse this trend for beef processors and establish some stability from a margin perspective?

Similarly, which demographics of feedlots – capacity and/or region – are most at risk of downsizing or elimination in the face of tighter calf supplies? 

Leave your thoughts in the comments section below.  

TAGS: Feedlots
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