Cattle feeding must recover for industry to rebuild: Rabobank

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The North American beef industry has settled into a “painful process of contraction, excess capacity and restructuring.” That’s according to a new report from Rabobank Food & Agribusiness Research and Advisory (FAR). The authors of the report, “North American Beef: The Liquidation Continues,” suggest the structural shrinkage of the North American beef industry “continues unabated.”

Rabobank “It is a rare occurrence that all sectors within the cattle industry are profitable at the same time,” says report author and Rabobank FAR group analyst, Don Close. “However, before the U.S. cattle industry can begin to fully rebuild after several years of contraction, it is necessary for equity recovery to take place in the cattle feeding sector.”

High feed prices and the severe drought of the past two years are cited as major factors putting pressure on the beef industry and producers. Industry analysts hoped 2013 would bring  changes needed to spur industry growth, but the first half of the year produced an all-too familiar reality.

“At the beginning of 2013, the market was optimistic that the industry could turn the corner and begin to grow again,” Close says. “However, the second half of the year is bringing a less optimistic view as the industry contracts and, as a result (beef) is at risk of becoming a higher-priced luxury protein.

“A number of complex challenges, including growing price spreads between beef and alternative proteins, excess capacity along the supply chain and dwindling profitability along the chain, are contributing to the shrinkage. Rabobank expects domestic beef supplies to continue to contract and the supply chain to continue restructuring, making a rebound in the beef industry unlikely in the near term.” 

As a result of industry contraction, excess capacity and restructuring, retail beef prices are escalating. Rabobank analysts say the spread is widening between beef and other protein sources, and people are not only downgrading between selected beef items, they are more frequently opting for the other proteins.

Rabobank’s new report outlines how feeder supplies, contracting North American supplies and Mandatory Country of Origin Labeling (MCOOL) legislation are contributing to the challenges faced by cattle feeders and processors.

The report, “North American Beef: The Liquidation Continues,” is available exclusively to clients of Rabobank and Rabo AgriFinance.



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Trever Hall    
Arizona  |  June, 28, 2013 at 03:36 PM

Maybe the know-it-alls at Robot Bank can make it rain.

MikeS.    
Kansas  |  June, 28, 2013 at 06:13 PM

Just allow more imports! We are told we don't need to producer here in the USA. We are told consumers don't care where their food comes from and food safety isn't an issue. Remember all this when JBS opens their Brazilian processing plants (how many?) and floods the great retail market for our consumers. Buying cheap cattle in Brazil and selling the beef here for a far better price at the same time destroying the US cattle industry if what will happen. To some that's ok but to many like myself I hope they can see the writing on the wall by the packer paid congressional puppets and realize that it is time to "nueter" the old dogs and turn the tide around whereby the USA leads again someday in production and manufacturing.

Cookie    
June, 29, 2013 at 06:05 AM

HEAR, HEAR!!

Mac    
Ohio  |  July, 01, 2013 at 10:28 AM

Oh, oh. Rabo has basically said adios to the beef industry. Whenever your banker tells you to rebuild equity before he/she will loan you any more money you are actually being told you are toast and your credit is being cut off. Next thing you know that banker is out to visit, counting cows and checking serial numbers on equipment. Bad news, girls! Very bad news indeed.


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