A recent report indicates that cow herd expansion will continue, but there should be no need for additional beef packing capacity.
CoBank’s Knowledge Exchange Division released the report saying herd expansion will rise another 3-5% in 2018 and 2019. Expansion in the past few years has been fueled by improved pasture conditions and continued profitability in beef production.
In the past three years expansion has been the most aggressive on record, says Trevor Amen, animal protein economist at CoBank.
“Recent slaughter numbers and the cattle on feed mix indicate the expansion rate is slowing, but barring any significant export market disruptions or weather events, expansion will continue through the end of the decade,” Amen says.
Despite an increasing cow herd bringing more market ready cattle through the supply chain, slaughter capacity should remain sufficient.
“Plants will add additional slaughter hours to manage the extra supply through 2019,” Amen says. “The biggest potential concerns as the industry drifts closer to maximum packing capacity are labor availability and temporary plant closures for unforeseen maintenance issues.”
Click on the map to view locations of some of the major packing plants in the U.S.
Packers have been proactive since mid-2016 when they began adding more hours for slaughter on Saturdays. There is little chance of any recently closed packing plans reopening.
CoBank analysts believe packers will add more robotics and automation to limit the need for skilled labor.
Export growth looks like it will continue, helping beef producers and packers remain profitable. For 2017, exports are on pace to increase 7-9%, while 2018 exports are projected to increase 5-7%.
“Export demand has been strong,” Amen says. “Momentum has been building since July 2016 and forecasts continue to adjust upward for the remainder of this year. Combined with decreased imports, we’re experiencing a more favorable net trade balance and keeping domestic per capita supplies in check while supporting prices levels.”
For more on the report watch a video interview of Amen below:
