Cattle Call is an original production of the Nebraska Rural Radio Association and is presented Blue Chip Herefords – Oxford, Nebraska.
Even with the nation’s cattle inventory at multi-decade lows, the U.S. beef industry has more fed-cattle processing capacity today than it did in early 2021, creating an unusual dynamic that continues to favor cattle feeders but raises concerns about the financial health of meatpackers.
That’s according to Brad Kooima of KKV Trading, who recently compared today’s slaughter capacity with January 2021, just before several new beef processing plants came online.
After analyzing traditional fed-cattle packing plants, Kooima found the industry has roughly 4,000 more head of daily shackle space than it did five years ago, even after accounting for recent plant closures.
“Our capacity is actually bigger. Now, vastly bigger? No. We’re talking a few thousand bigger… and we’re doing this math right now… with a lot less cattle. It fits the narrative. More shackle space than cattle, and by quite a ways.”
Kooima said the imbalance helps explain why cattle feeders continue to have leverage in cash negotiations despite packers posting negative margins.
The comparison also shapes his view of USDA’s newly announced $500 million investment in small and mid-sized meat processors. While he believes strengthening regional processors is positive for cattle producers, he questioned whether adding support for processors addresses the industry’s underlying issue.
“The regional packers are important. They are absolutely critical… they keep everybody else honest… We need them. Absolutely.”
However, Kooima cautioned that if large packers continue losing money while smaller competitors receive government support, additional major processing plants could eventually shut down.
“It doesn’t take much imagination to think that we could lose another plant… with that kind of overcapacity.”
He suggested preserving processing infrastructure may ultimately require increasing cattle availability rather than simply expanding processor support, pointing to the continued closure of the Mexican cattle border as a factor limiting supplies.
Key Takeaways
- Kooima compared current fed-cattle slaughter capacity with January 2021.
- The U.S. has about 4,000 more head of daily fed-cattle shackle space today than five years ago.
- Today’s larger processing capacity exists despite a significantly smaller U.S. cattle herd.
- More shackle space than available cattle continues to strengthen feeder leverage.
- Kooima says USDA’s $500 million for small and mid-sized processors should increase competition for cattle but may not solve the industry’s long-term capacity imbalance.
Other Topics Discussed
- Holiday-week cash cattle trade and seasonal boxed beef trends.
- Negative packer margins and reduced slaughter schedules.
- Formula cattle and captive supply levels.
- August live cattle futures discount and basis implications.
- Beef-on-dairy cattle numbers.
- Border closures and their impact on cattle supplies.
- Risk management and cattle hedging strategies.
- Carcass weights and market currentness heading into July.