Agricultural News
Randy Blach of Cattlefax- We Gotta Have a Corn Crop (A BIG Corn Crop)
Mon, 11 Feb 2013 05:46:19 CST
It was a simple message that the CEO of Cattlefax had for cattle producers gathered in Tampa this past weekend- "We Gotta Have a Corn Crop." His comment came during his summary remarks to the two hour session that was delivered to a full house that heard the outlook on weather, feed grains, ethanol and other energy issues, beef demand, international trade and cattle prices. We have part one of a series of Q&A segments with Blach on the Beef Buzz.
Blach admitted it will be a difficult year for margin operators in the cattle business. He emphasized the importance of risk management due to continued volatility and rising capital requirements. Packer margins, though, should see some improvement as the result of the decline in capacity, a trend that he expects to continue.
"Don't be surprised if we see the loss of another one or two plants before we're done with the consolidation phase," said Blach. Likewise, he said the industry can expect cattle feeding capacity to continue its decline due to the current market situation.
Speaking with Radio Oklahoma Network's Ron Hays, Blach said the key to stopping the slide is a corn crop.
"We've got to have a corn crop. We're out of plan 'B's. You look at how we've used our available roughage supplies when we had the failure of the corn crop this last year and we've warehoused cattle in all aspects of it. Placements were down 1.3 million head from the later summer and through the fall. We've got to have a corn crop. It's not just us, but pork and poultry. Those industries have to have a corn crop. This has been a devastating drought scenario that we've gone through and it's spilled a tremendous amount of red ink through all of these livestock production segments."
He said the closing of the of the Cargill packing plant in Plainview, Texas, was a natural result of the decreased corn crop and the resulting drop in the number of cattle. The closing in Plainview will may not be the end of it.
"I don't think we can expect that that will be the end of it. Last year the number of fed cattle harvested declined about 900,000 head. That would be equivalent to a plant about the size of Plainview of what they'd harvest on an annual basis.
"We look at what's coming down the road and we're likely to see again close to that kind of reduction over the next couple of years again until we can start to grow this herd back. The likelihood is that we'll see another plant close. We'll likely see some additional non-fed plants that will be shuttered as well."
Plant closures are a natural part of the business cycle we find ourselves in, Blach said. While painful, they do serve a positive function.
"It's just a reflection of the very difficult margin situation they've been in over the last 15 months. That's a natural occurrence when you go through the kind of red ink that's been spilled. So, the closing of the plant will make all of the other existing fed-cattle plants more efficient. They'll gain some leverage back. They'll have a more efficient production system now. That's the necessary step. That's why we end up seeing contracting whether it's in the packing segment of the industry or in the feeding segment of the industry, that's eventually what you'll see is some improved efficiencies."
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network- but is also a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show- and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.
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