Investigating Beef Price Spread Relationship With Processing Capacity Utilization

When the COVID-19 pandemic caused temporary closures of U.S. cattle slaughter facilities, consumers were hit with increased beef prices, while beef producers felt the brunt of lower fed cattle prices. The temporary shutdown following Tyson's beef packing plant fire in 2019 triggered a similar but less extreme reaction with regard to price spread. These occurrences led to lingering concerns about market power in the beef industry and resulted in an investigation on anticompetitive behavior by meat packers.

"The beef price spread and slaughter numbers have historically been used as indicators of potential packer profitability, and some have questioned if packer slaughter is used to control the price spread," said Charley Martinez, project lead and director of the UT Center of Farm Management. "Our study analyzes causal relationships between price spread and a weekly and Saturday slaughter capacity utilization measurement."

The research found that while weekly and Saturday slaughter capacity utilization directly affect live cattle-to-box beef spread and vice versa, these causal relationships are not happening in all instances. The study shows that an increase in the price spread in the previous week positively impacts national Saturday slaughter capacity utilization when price spread for most of the timeframe analyzed, 2010-2021.