Increasing Supply Challenges Doesn't Mean You Can't Retain Ownership
Fall cattle work is here. The industry might not face the sharp price drop seen last fall, but market indications are pretty clear that there are still challenges ahead. Sterling Marketing estimates beef production for the third quarter will be up 6% over a year ago, and the highest since 2013, followed by our outlook for a 4% increase in the fourth quarter over a year earlier. Feedlot inventories remain well above a year ago and carcass weights once again continue to increase.
Furthermore, meat competion is rising. Hog numbers are increasing into the opening of the new Clemens Food plant in Michigan and Triumph-Seaboard Foods plant in Iowa. Together, these two plants add 5% onto the current capacity to harvest and process hogs. That is a big deal and even bigger when those plants bring on additional capacity during first-half 2018 and Prestage Foods brings their new plant on line in Iowa. All totaled, by early next summer, hog slaughter capacity will be up 11% from 2016 reaching nearly 131 million hogs annually.
In this scenario, declining prices still indicate opportunity for retained ownership. Own and market those added pounds of gain, but know the numbers and plan your strategy.
The market is transitioning into larger supplies and a consumer who is increasingly aware of price/value, less likely to want a 16 oz. steak, and likely more health and budget conscious. This scenario might spell challenges, but is not necessarily a disaster for producers.
