Today, we seem to have a bloodlust desire to expand cattle/beef processing in the face of too much current capacity in the industry. That just doesn’t make much sense in my view.

According to the June 28, 2021, edition of Steve Kay’s Cattle Buyers Weekly, “Cattle producers and the USDA appear to be fixated on a perceived lack of slaughter capacity in the U.S. beef industry. Yet not only is there ample capacity but existing processors and a new company are planning to add more capacity over the next two years.” In a subsequent conversation with Steve, he told me, “This means the industry might eventually add 6,700 head of new daily capacity. That's on top of the current 131,000 head.”

What’s fueling this insatiable desire to build redundant cattle slaughter/processing plants? My answer is greed and hubris. The greed factor is stimulated by the current high prices of beef compared to the relatively low prices for the beef raw material — cattle. The hubris factor enters the picture when those both within and without the industry in their prideful zeal think that all they need do to make money is to expand to sell more.

However, my fundamental problem with this unsated hunger for more capacity is that the proposal for convincing investors to support their “build it and they will come” desires starts and ends with cattle slaughter/processing. Beef marketing is almost an afterthought.

According to folklore, Robert Peterson — the long-since-passed IBP scion — was rumored to have said, “Beef’s a by-product, we’ll make money on the blood, guts and hides.” He kept expanding IBP but ingeniously forced beef marketing to change with its last major product innovation — boxed beef. Peterson may have said that beef was a by-product, but he made sure that his beef was needed by marketing boxed beef.

The justification for expanding beef slaughter capacity seems to be the result of cattle producers’ dreams of wanting to capture the money that the big beef processors are allegedly making at the producers’ expense. Or the current crop of plant managers want to capture perceived profit leaks by becoming more efficient.

Unfortunately, we have seen few new beef customer/consumer products in the last 50 years. This capacity expansion basis seems to be that profits will come from the drop and exports, not marketing beef.

Thus, we have a beef industry dominated by the production side of the house with few resources being applied against beef marketing in forms unimagined today. But those marketing advances are needed if the industry is to grow and prosper in the face of continued chicken expansion and alt-meat products’ market incursions.

My concern is that this plant-building spree will only result in exacerbating an overcapacity situation with those who are undercapitalized losing money faster than they can count it. And the cattle producers lose again.

A more responsible way to bring fruition to this capacity expansion desire is some fundamental consumer marketing research to help develop strategies and tactics and apply them prior to the decision being made to expand. It is basic that if you start with consumer needs and wants and work back to the supporting production needs, you will have a more reliable and workable business proposition. If expansion is demanded by the market, it is a basis for a wiser and more profitable course than simply expanding processing capacity because of perceived slights or leaks.

How the cattle producers deal with their purported cattle processing injustices needs to be addressed, but not by moving into areas where they have little knowledge or expertise such as cattle/beef processing and more importantly, beef marketing. The few areas where cattle producers have successfully vertically integrated into processing and marketing is with the niche beef products. These can and should be expanded, but much of the other beef sold today is still fundamentally a commodity.

My advice to cattle producers is make your peace with the processors so more beef can be marketed. At the end of the day, you still have the cattle and the processors need your cattle to operate. Start the negotiations with them at this point and reach a conclusion that works for both. Good luck!

Build more cattle slaughter capacity? You cannot be serious!

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