Kansas City Fed Outlines Challenges/Opportunities in New Year

OKLAHOMA CITY, OK – Recent shocks related to the pandemic, weather, and a cyberattack led to a decline in demand for cattle at processing plants and a weak price environment for cattle producers, who were not able to adjust herd sizes quickly enough to increase profitability says Cortney Cowley, a senior economist in the Regional Affairs Department of the Federal Reserve Bank of Kansas City.

Without adjusting the supply of cattle, short-term disruptions could result in a longer period of low profitability for cattle producers and farm financial conditions in the cattle industry could continue to be challenging if government support is withdrawn or if slaughter capacity remains limited.

Cowley’s report for the Federal Reserve explains several pressures that could threaten profitability for the industry, but opportunities for growth exist as well.

One such concern is from the pandemic and other disruptions which revealed vulnerabilities in the beef supply chain that, if not addressed, “could continue to result in larger and longer-lasting downside risks for cattle producers when shocks occur.”

Another concern is under the umbrella of variable weather conditions which Cowley says “present downside risks for cattle prices and producer profits, with some areas of the country facing more strain than others.”

A final concern is whether plant-based and lab-raised proteins and competing meats gain market share domestically.

The opportunities fall right in line with the concerns however and she adds that consumer interest in locally-sourced beef is growing, producers have long adopted new technologies and sustainable practices on their operations to offset some of the effects of unpredictable weather and increasing global demand for traditional proteins – including beef – are likely to support prices domestically as the beef industry builds on record-setting export demand from 2021.
(SOURCE: All Ag News)

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