Casey Kimbrell@CBKimbrell
A lot of changes to the cattle sector in the last two weeks and none of it good.
My 2¢: (probably more than it’s worth)
I can’t help but think that if the Lexington processing plant were owned by an independent, it wouldn’t be closing. If things got so bad that the independent were facing bankruptcy, there would be an immediate sale of the plant and processing would continue under a new independent owner. This is one of the major problems with consolidation. They can throttle capacity (their plan released Friday will halt approximately 7.5% of the nation’s slaughter capacity) which will lower cattle prices and drive up prices for the consumer. When you have that much leverage, you have control. I see a lot of packer defenders saying “if they had control, they wouldn’t be losing money right now.” This argument seems reasonable until you realize that the shrinking cattle herd is due, in part, to their leverage over the cattle market which has systematically removed the incentive to increase herd numbers. I say “in part” because that’s not the only factor that set up this scenario. Cheap imports are another, although the beef packing cabal has a lot to do with that as well.
Long story short, the beef herd is destined to continue to shrink if things continue as is. Everything from government actions to plant closures are pushing it this way. Dependence on foreign production seems to be the way of the powers that be. It’ll be our downfall as a nation at some point, but I reckon we’ll save a few bucks in the meantime.
