Beef Cattle Market Impacted by Limited Packer Capacity

WASHINGTON, DC – Four experts offered a diverse group of Congressional members on Wednesday, ideas for addressing urgent challenges within the beef supply chain.

The hearing from the House Agriculture Subcommittee on Livestock and Foreign Agriculture focused primarily on the lack of packer capacity in the cattle markets.

With the majority of the cattle harvested nationwide by just four major packers, a run-up in the cattle herd following a devastating drought in the Southwest led to a situation where the supply of cattle outpaced the capacity to process the beef for consumers.

According to Dr. Jayson Lusk, Distinguished Professor and Head of the Department of Agricultural Economics at Purdue University, many of the ideas being floated by the industry and lawmakers to address the problem may be treating the symptoms and not the sickness. “Discussions of cattle prices and packing capacity can give the incorrect impression that beef and cattle markets are a zero-sum game”, he said.

Because the beef cattle market responded remarkably well to a series of large and unexpected disruptions, Lusk explains that “if you want excess capacity to exist in the system, somebody has to pay for it at the end of the day”.

Dr. Dustin Ahern with Rabobank adds that if these new packing plant ventures are going to succeed, they must be specialized. The use of “AMA’s or alternative marketing arrangements, is the best way to ensure that these new plants can get the specialized cattle to meet the brand they are trying to build.”

Members also heard from Dr. Jennifer van de Ligt with the University of Minnesota, and Dr. Keri Jacobs from the University of Missouri.
(SOURCE: All Ag News)