The infrastructure for the beef industry was built in the early seventies when we had 130 million cows in the U.S..
We built the feed yards to accommodate that many calves, and we built the packing houses to handle and harvest that many animals.
Today we’re at 87 million cows, and that’s created an unbalance in the industry’s infrastructure. Bill Mies is a visiting professor in Texas A&M’s Animal Science Department.
“We’re producing the same tonnage of beef that we produced back in the early seventies because of our increased efficiency, changes in our genetics and in our feeding, but we’ve still got the hotel rooms in all of those feed yards that were built in the early seventies that no longer have occupants.”
Mies says a shortage of calves creates fierce competition.
“The feed yards must compete heavily in order to get cattle to put in their feed yards. That keeps the prices at the rancher level very high. The packing industry was the same way. They had to compete, in order to get the cattle from the feed yards to harvest in their houses, and that kept the prices high to the feed yards, and so the whole system was because we had an infrastructure that was built for many more cattle than we actually do have today.”
The packers have begun to downsize.
“They have closed three big plants in the last three years. There’s another one possibly on the horizon. Feed yards are trying to find other things to do in a feed yard besides feed cattle in it. Some of them are growing Holstein heifers for dairies. Others are doing other things, but the feed yards are still at least twenty-five per cent over-built for the number of cattle we’ve got. That’s going to keep competition high for the foreseeable future, and until somebody bites the bullet and starts bull dozing down feed yards, cow/calf people are going to be in a very advantageous position.”
Mies believes the industry’s infrastructure will finally shake itself out.
“I think the packing industry is very close to getting in balance. I think one more plant would probably put them in balance. In the feed yards though, we still have considerable work to do.”