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·         Report explores expanding U.S. beef packing capacity

·         Rabobank: The Case for Capacity: Can the US Beef Industry Expand Packing Capacity?

 

 

Report explores expanding U.S. beef packing capacity

Additional 5,000-6,000 head daily beef packing capacity would help return U.S. cattle supplies and packing capacity to historical equilibrium.

 

Krissa Welshans, Feedstuffs 

Oct 13, 2020

 

Recent beef supply chain challenges, including the Tyson Foods Holcomb, Kan., processing plant fire in the fall of 2019 and the disruptions during the COVID-19 pandemic, have amplified the discussion surrounding the need for and feasibility of additional U.S. beef packing capacity.

 

Now, a new analysis by Rabobank is suggesting that an additional 5,000-6,000 head of daily beef packing capacity would help return U.S. cattle supplies and packing capacity to an historical equilibrium. This level of expansion, the firm noted, would allow capacity to grow without a sharp contraction in beef cow numbers while still maintaining packer profitability.

 

The report explained that beef packing historically has been a breakeven business. However, as cattle herd expansion has outpaced capacity, packers have been strategically positioned to capture record margins in recent years.

 

“While the Tyson Holcomb fire and COVID-19 created acute and unexpected massive imbalances between cattle numbers and the suddenly limited availability of labor and/or facilities, the course of events over the past couple of decades had already created a scenario of relative imbalance,” the report relayed.

 

As such, Rabobank believes that adding packing capacity would result in both a larger U.S. beef industry over the long run and more balanced profitability throughout the supply chain. Further, if the U.S. could avoid major herd liquidation in the current cattle cycle, the beef industry will be well positioned to capitalize on growing global protein demand.

 

“If such expansion can be achieved through in-plant technology improvement and new consumer demand-driven small and medium-sized plants, profitability will be more evenly distributed throughout the beef and cattle supply chain,” Rabobank animal protein analyst Dustin Aherin explained.

 

More balanced profitability, he said, would prevent the U.S. beef industry from shrinking and place it in a better position to capitalize on growing global protein demand...

 

more

https://www.feedstuffs.com/markets/report-explores-expanding-us-beef-packing-capacity

 

 

The Case for Capacity: Can the US Beef Industry Expand Packing Capacity?

 

Dustin Aherin, Rabobank

October 2020

 

Rabobank’s analysis suggests that an additional 5,000 to 6,000 head daily beef packing capacity would help return US cattle supplies and packing capacity to an historical equilibrium without a sharp contraction in beef cow numbers, while still maintaining packer profitability.

 

Report summary

 

Recent supply chain disruptions in beef packing and processing have amplified the discussion surrounding the need for and feasibility of US beef packing capacity expansion. Adding packing capacity would result in both a larger US beef industry over the long run and more balanced profitability throughout the supply chain. If the US can avoid major herd liquidation in the current cattle cycle, the beef industry will be well positioned to capitalize on growing global protein demand.

 

“If such expansion can be achieved through in-plant technology improvement and new, consumer demand-driven small and medium-sized plants, profitability will be more evenly distributed throughout the beef and cattle supply chain,” according to Dustin Aherin, Analyst – Animal Protein.

 

“More balanced profitability will prevent the US beef industry from shrinking and place it in a better position to capitalize on growing global protein demand. Simultaneously, improved profitability and industry stability allow for more outward, consumer-oriented focus and investment, which is critical for the US beef industry’s long-term success.”

 

document, plus link to full report

https://research.rabobank.com/far/en/sectors/animal-protein/the-case-for-capacity.html