Beef Buzz News
Labor Shortages are the Root Cause of Stagnant Cattle Prices Says Justin Benavidez
Fri, 22 Oct 2021 13:14:03 CDT
There are many different ideas as to why cattle prices have not improved. For the second day, Radio Oklahoma's own Ron Hays gets the scoop from Justin Benavidez, an assistant professor and extension economist at Texas A&M University. He tells Hays that it boils down to the number of cattle vs. processor capacity.
"If you look at the data, I truly think the issue we face more than anything is the shackle space compared to the number of animals," Benavidez said. "I do not mean to say that market power is not something to be looked at, but if we looked at the historic dynamics the real problem comes down to how many live animals do we have and what (capacity) is available."
He said he agrees that giving producers more negotiating power can have immediate-term impacts. The real problem is the imbalance of supply and demand, he added.
"I know I will probably get some flak for saying that, but that is the reality," Benavidez said. "We see other problems come and go but if we do not have enough (capacity) we see depressed prices if we have (overcapacity) we see higher prices."
Beef processors and packers responded to overcapacity by closing plants. The industry leverage left producers when the Cargill beef processing facility in Plainview, Texas closed its doors in 2013.
"Plainview closing - lost 5,000 to 6,000 shackles," Benavidez said. "Ever since then, we have been short on shackle space."
When Benavidez speaks with producers, he said he gets mixed reviews on the situation. Although negotiated volume has increased over the last year, prices have been stagnant for the last two to three months, he said. The fundamentals of the cow and calf herd tell analysts that prices should also be trending upward, he added.
"We forecasted higher prices in the fall," Benavidez said. "The problems we are running into are that we are hearing that many packing plants are running at 60% capacity, depending on the day. To me right now, the real issue is a labor shortage in those packing plants."
Some facilities need a minimum number of employees to run the plant and some days plants do not run, according to Benavidez. When a plant is not processing cattle quickly enough to fill every space on the line, those empty spaces count against capacity, he added.
"I get mixed reviews (from producers)," Benavidez said. "I think as long as the plants get up to full speed, we have forecasts for higher prices - prices are already higher than they were at the beginning of the year, we are just stuck right now because of some of these larger economic issues the country is facing."
Click on the LISTEN BAR below to hear more from Ron Hays and Justin Benavidez as they talk about the root issues of flat cattle prices.
The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network and is 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.
Listen to Ron's conversation with Justin here.
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