Nalivka: Focusing On The Demand Side of the Equation

Rana Creek Ranch
Rana Creek Ranch
(Hall & Hall)

The following opinions are those of John Nalivka, president, Sterling Marketing Inc., Vale Oregon.

Ask anyone about the biggest impact of COVID on the red meat industry and there is a pretty good chance that the response will be packing plant closures.  Of course, I would not disagree with that answer.  I have written about and discussed the topic of capacity this year probably more than I care to think and it has been critical to the financial health of the industry. 

However, I do not arrive at the same conclusion as others in the industry that we need more capacity.  Capacity is not the problem – we have enough.  The issue is utilization which in turn is partially tied to structure with regard to concentration of capacity which became apparent with COVID.   The conundrum is to benefit from economies of scale while also managing exposure to operational risk and reducing disruption in the supply chain.   

When we discuss industry, the focus is often on supply.  I just sent out a client update regarding the recent Cattle on Feed report.  It was centered on feedlot inventories – supply going forward and the likely price impact.  

Let’s shift the focus to the demand side of the equation.  Supply-demand dynamics during 2020 have been complicated at best, particularly in the face of significant supply chain disruptions and consumers rushing to stock freezers.  And, while strong export demand is definitely positive, it cannot replace solid domestic demand.

As we have moved beyond much of the COVID-driven, market distortions, with the availability of a vaccine it may become easier to sort through and focus on some of the supply-demand complexities seen in 2020.   In fact, demand will become more critical heading into 2021 including consumption at-home, away-from-home, and for export. 

It takes all of those parts working together and with foodservice accounting for 50% - 55% of consumer purchases, one issue that has to be ardently and honestly reconsidered is the restriction on sit-down dining.  I am not a politician or a scientist, but from an economic perspective, getting people back to work, supporting restaurant businesses, and continuing on the path of repairing the economy is critical to the red meat industry.  It’s that simple.     

 

 

Latest News

AFIA Objects to EPA’s Draft Risk Evaluation of Formaldehyde
AFIA Objects to EPA’s Draft Risk Evaluation of Formaldehyde

The American Feed Industry Association says formaldehyde has been "safely used in the U.S. animal food industry for over 40 years via accurate automated equipment."

Power of Meat Reports Strong Meat Consumption, Evolving Consumer Trends
Power of Meat Reports Strong Meat Consumption, Evolving Consumer Trends

The Meat Institute and FMI-The Food Industry Association released the 19th annual Power of Meat report.

Cattle Imports from Mexico
Cattle Imports from Mexico

Mexico has become one of the major beef import sources for the U.S. as beef trade evolved from simply supplementing deficit beef production in Mexico to bilateral, product specific trade between the two countries.

Markets: Cash Cattle Markets Nearing Historic Highs
Markets: Cash Cattle Markets Nearing Historic Highs

All classes of cattle sold at higher prices for the week and most are at or near record highs. Supplies of all classes remain extremely tight.

International Genetic Solutions Debuts New Informational Resource
International Genetic Solutions Debuts New Informational Resource

International Genetic Solutions (IGS) recently unveiled a new information resource and video platform for important beef industry topics pertinent to producers’ bottom lines.

Sage_Grouse_Booming
Ranchers Urge BLM to Incorporate Latest Science in New Sage Grouse Plans

NCBA and PLC are requesting that BLM significantly extend the comment period deadlines while ranchers and other local stakeholders evaluate these lengthy proposals.