Dr. Andrew Griffith - Department of Agricultural and Resource Economics, University of Tennessee
What does the smaller cattle inventory mean for the new packers that are expected to come on line in the near future?
It is important to remind readers that several large beef packing facilities are being built. Some are new ventures while others are expansions of well-established packers.
The first thought that comes to mind is that coming online when the beef cattle inventory is at its lowest level in more than 60 years and heifer retention is imminent, it is going to be a tough go of it for these operations. The reason it will be a tough go is because cattle prices are expected to increase, which means these new operations will require more capital to purchase animals and interest on that capital has increased significantly the past couple years. These large commercial packing facilities are going to be competing with established packers for a limited supply of cattle, and it will be difficult to win that price war.
This does not mean they will fail, but it will result in thin margins to start.