Beef packing plants in the U.S. continue to consolidate, adjusting to a reduced supply of cattle to process.
However, Canadian cow-calf producers are still expected to see strong prices during the upcoming fall calf run – prices even higher than last year.
Kevin Hursh of SaskAgToday.com spoke with Brenna Grant, the manager of research services for CanFax about the American packing plant closures and what it means for Canadian producers.
Grant noted the closures started at the beginning of the year with Tyson Foods closing its Lexington, Nebraska plant in January as well as reduce its Amarillo, Texas plant to a single shift.
Tyson Foods also announced the closure of its beef processing plant in Joslin, Illinois and is looking for a buyer for its plant in Pasco, Washington.
In June, JBS announced it was going to shut down its Souderton, Pennsylvania plant this month.
Grant said the closure in Joslin is different because it happened within one day, whereas the others had a 60 day notice.
"And when you actually add all of those closures up, it really brings packing capacity much closer to the current supplies. And this really means that we're seeing a shift in leverage from the feedlot back to the packing plant." she said.
When asked if reduced capacity in the U.S. will have an effect on cattle prices, Grant said packing plants are trying "to realign fed cattle prices with where boxed beef prices are", especially since plants "have been operating in the red" over the last 18 months.
"We didn't see boxed beef prices reach the levels that had been expected in May and June and that was really disappointing. And so as we move into the second half of this year, yes, there are expectations that packing plants are going to be more disciplined in terms of efficiencies with these plants, but also what they're bidding on fed cattle in order to improve margins." she added.
With fed cattle prices under some pressure, Grant was then asked what would it mean for calf prices in the fall.
She noted delivery prices are over 20 per cent higher than last year but is expecting "more of a seasonal price movement throughout the fall" with peaks between the end of September and early October then a decline in November and December.
In other words, it's still excellent times for cow-calf producers.
"Absolutely, cow-calf producers definitely retain the leverage at this point in the cattle cycle."
You can see the full interview with Brenna Grant below.
