Denver - Consolidation in the U.S. cattle feeding industry was seen growing as feedlots expand to survive during tough times, industry sources said.
"The pattern, I think, will be one where we're going to see larger operations and we're going to see more operations under single ownership," Topper Thorpe, executive vice president of Cattle-Fax, said at the 100th annual National Cattlemen's Beef Association.
Thorpe said the trend to larger feedlots was likely because they could take advantage of "economies of scale" to make it through periods of unprofitability as is happening right now in the U.S. cattle feeding areas of Nebraska through Texas.
"We've seen some situations in south Texas where some of those feedlots have gone out of business, mostly becasue they don't have packing capacity down there and to ship those cattle to the Panhandle costs enough where they can't be competitve," Thorpe said.
Demand for expandable feedlot property is "hotter than a pistol," John Wildin, a realtor with Doug Wildin and Associates of Hutchinson, Kansas said from his booth at the NCBA convention.
"Right now the big thing is 30,000 head, or larger, and has to be able to be expanded. The big question is can I expand it? Is there enough land with it, is there enough water with it. Can I take it to 50,000, can I take it to 100,000? That's what they're all looking at," Wildin said.
Feedlot property demand started quietly about two to three years ago but has become a "hot commodity", with the focus from the Texas Panhandle up through western Kansas, eastern Colorado and northeast Colorado, Wildin said.
"People in the business are really expanding. The general feeling is that you need to be larger and get yourself in some sort of alignment to stay competitive," Wildin said.
There have been about 12 feedlots with capacities of 20,000-75,000 head that have sold in the past year in the Texas Panhandle, Wildin said. Prices paid have ranged $80.00 to $180.00 per head, depending on location, condition, customer base and size, Wildin said.
Wildin added that it was too early to tell if the current losses in the cattle feeding industry would result in widespread feedlot turnover, but there would be some that may not survive.
"In a custom lot, those losses are shared by many entities but when you get into a lot where the lot owner owns all the cattle, yea, you're going to see some adjustments," Wildin said.
Wildin added that the large feedlots owned by corporations with deep pockets will be able to take this round of losses.
"Feedlots where the losses are spread over many economic units and customers probably will not be in bad shape, especially if the losses were hedged," Wildin said.
Press Here for Info on Setting Your Own Web Site
Meat Industry Insights News Service
P.O. Box 553
Northport, NY 11768
Phone: 631-757-4010
Fax: 631-757-4060
E-mail: sflanagan@sprintmail.com
Web Site: http://www.spcnetwork.com/mii