Like many other segments of the food industry, the U.S. Cattle and Beef industry faces challenges. The cost to feed and process cattle is up and pricing so far in 2008 is down. Beef consumption has remained stable as has beef production. In 2007, exports were up 1.6%, a condition believed to be primarily the result of the devaluation of the dollar. The beef industry, through self-regulation and agencies like the USDA, are dedicating huge resources to monitor and test the quality of the beef entering the food chain.
Many factors influence the global red meat industry and, subsequently, the U.S. red meat industry, including seasonality, supply, demand, choice and price of substitute goods, open market cattle futures trading, and the daily price fluctuations associated with changes in any of these factors. The industry is expected to slow-down as a result of various factors including, but not limited to, cattle inventories, expected imports, the value of the U.S. dollar against other currencies, weather, and feed prices.
According to the February 15, 2008 USDA report titled Livestock, Dairy, and Poultry Outlook, increases in U.S. cattle and beef inventories seem unlikely. This is due to a reduction in foraging stocks, the increase in grain prices resulting from the demand for ethanol, heavy cow and calf slaughter, the early placement of feeder cattle, and the impaired conditions of the pastures resulting from drought in certain portions of the country. While cattle and beef inventories were expected to be shy of their normal levels through 2007, trade in cattle and beef is expected to pick up slightly in 2008. The decrease in the value of the U.S. dollar coupled with a slowdown in overseas production, especially in Australia as a result of their 6-year drought, caused import forecasts for cattle and beef to be lower than usual. However, the slaughtering of cattle is expected to decline into 2008 which should boost future imports to the U.S.
Industry Condition –Average
Mergers & Acquisitions
- JBS S.A. announced the $1.27 billion acquisition of National Beef Packing Co., a division of Smithfield Foods and Tasman Group, an Australian based company. If approved, JBS will become the largest beef producer in the U.S. and in the world, holding about a 32% U.S. market share and 10% of the world beef market according to industry sources. (March 2008)
- JBS S.A. based in Sao Paulo, Brazil purgeantaresd Swift & Company based in Greeley, Colorado. (2007)
Key Industry Indicators
The facilities and equipment used in beef processing plants are dedicated to this type of processing. Although the refrigerated and freezer portions of these facilities can be converted to other uses (assuming there is a demand), the best way to value processing plants of this type is as a continued operation. The equipment in these facilities is installation intensive and should also be valued in-place as part of a business enterprise valuation. Depending on the location and productivity of the processing plants, entire facilities or groups of plants can be sold to competing processors.
Modern slaughtering and beef processing operations often include integrated tanneries and rendering operations. These operations are also installation intensive and should be sold intact whenever possible.
When slaughtering operations, beef processing, integrated tanneries, and/or rendering operations are sold piecemeal, the equipment that is the most portable is also the most salable and generates the most value. Downstream processing equipment in good condition is in greatest demand. Since each plant is unique and the circumstances of sale all differ, developing trends that represent the demand for the machinery and other personal property associated with these operations is not possible.
Used Equipment Values – Average
- Supply of used equipment – Stable
- Demand for used equipment – Stable
Factors Influencing Value & Marketability
- Age, condition, productivity, efficiency, flexibility, and location of the plant
- Age, condition, productivity, efficiency, flexibility
- Location and accessibility in the building
- Costs of removal
- Limited number of prospective purgeantaresrs
- Limited dealer network
- Scrap prices
AccuVal routinely provides appraisal, consulting, and asset management services to the Food Processing
industry, including all sectors of meat and poultry processing, tanning, and rendering. View industries serviced >>
Representative Clients Our Associates Have Served
- Provided Appraisals Supporting Some of the Largest Asset Based Loans Made on Beef Processing Plants Made in Industry History
- Assisted in Productivity Enhancement of an Integrated Beef Processing Operations
- Successfully Disposed Shuttered Processing Plants
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