John Nalivka

John Nalivka is the president of Sterling Marketing, Inc., which provides economic research and market advisory services to the livestock and meat industries. He became affiliated with Sterling in 1991 as executive vice president and he has owned the company since 1994. Nalivka serves clients across the red meat supply chain from producers to end-users.

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The packing industry is driven by throughput capacity and the utilization of that capacity. Packers compete for cattle to accommodate that capacity just as feedlots compete for feeder cattle.
The market took a normal seasonal downturn into September following the Labor Day weekend pushing the question of demand and the opportunity for seasonal strength in the fourth quarter to the forefront.
The packing industry is much more complicated than a plant’s slaughter capacity alone. Capacity, economies of scale, labor, and debt are all critical to financial success.
America’s beef cattle inventory continues to tighten, pushing market prices to record levels. Under normal conditions, that would lead to anticipation about building herds again. However, this cycle is anything but typical.
Food price is real. Ask any American about their budget for groceries. However, there is another part to this story that is rarely mentioned in these news stories – the cost to produce food.
Just as analysts use daily reported prices to assess markets, we also rely on the government’s reporting of the state of the economy. That’s not always helpful when trying to assess the outlook for consumer demand in the face of record high beef prices.
While I do not need the government to tell me how the cost of living has increased, the most recent data for July is now available. To be honest, I question whether the officially reported inflation figures align with what we are experiencing.
This summer’s wild fires in many parts of cattle country has changed the economics for many ranchers and business risk has increased significantly.
The typical elements – ample forage and soaring prices – are in place to encourage herd rebuilding. But this cattle cycle is anything but typical.
When any government agency starts the rule-making process, particularly when it concerns markets, it is time to pay attention.