The other shoe has fallen

By: Jill Dunkel

I hate to say, “I told you so,” but… Well, I didn’t tell you, but last year at the Feeding Quality Forum, economist Mike Sands of Informa Economics told us:
“We’ve seen some extremely tight packer operator margins over the last year.”

“Fewer cattle will eventually mean fewer yards to feed them and packers to process them. There’s not enough to go around…”

Five months later, the truth to Mike’s statement rings loud and clear. Something had to give. Unfortunately, what gave just happened to 2,000 jobs to the small town of Plainview, Texas. The ripple effect of the closing of Cargill’s meat packing facility is just now coming into focus for many involved.

The Plainview Herald reported that on the afternoon of the announcement, local churches were flooded with people who gathered to pray about employment for themselves and their neighbors. Ironically, liquor stores were also extremely popular that day for those wishing to drown their sorrows.

The news doesn’t change things, but does echo how the oversupply of our system is hitting bottom lines. On January 1, 2009, the US cattle inventory was 94.5 million. January 1, 2012, it was 90.8 million. As of FEED-LOT’s print deadline, the 2013 inventory had not been released, but experts place estimates at 1 to 1.5% lower, or 89.9 to 89.4 million head.

As of last summer, Sands said at the earliest, 2015 might be when inventory starts to turn around, but he alluded to the fact that it’s “a little bit like turning a battle ship on a farm pond.”

“We really have not put the incentives in place yet on a sustained base to turn things around,” Sands said back in August. “And as a result, numbers are going to continue to shrink. That means beef production is going to come down…” possibly back to the supply of the early 1990s.

Sands believed last summer we were just on the front end of structural changes in the industry. Unfortunately, Cargill’s announcement was not how I had hoped our industry would kick off 2013.

You know the saying “Waiting on the other shoe to fall.” Here’s to hoping the other shoe has fallen and there’s no more shoes left to fall. 

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