We are facing a precipice in the beef industry. Cattle prices are at an all-time high while cattle numbers are at an all-time low. This is a good thing for ranchers, but maybe not so good for the “beef industrial complex.”
The feeders and packers rely on volume to make their margins. The feedlots must be full. Likewise, the packing plants need to run at full capacity to be profitable. With low cattle inventories, the volume is not there. How long can these guys run in the red before they fail? Will cattle numbers ever get back to where they once were? Are we seeing a paradigm shift in the cattle industry?
Farnam Street proposed an interesting thought in their weekly blog:
“The greatest business failures often come not from playing the game poorly, but from continuing to excel at things that no longer matter.”
The feeder-packer system is broke. They are clinging to an obsolete system. Consumers are leaning more towards a healthy and traceable beef product. Small operations raising and selling grassfed beef are gaining market share faster than ever. How much longer can the feeder-packer system stay solvent?
As Joel Salatin points out, it makes more sense to have lots of smaller processing plants than it does to have a few mega-plants. More smaller plants is a much more resilient model.
How many things are we doing on our farms and ranches that are becoming obsolete? Are we actively seeking improvements and new ways to do things, or are we just rearranging the deck chairs on the Titanic?
Quote Worth Re-Quoting
“See the challenges in your life as fuel to fire you up. Look around, and you’ll find opportunities silently waiting for you to recognize them.” ~ Les Brown