Investigating Beef Price Spread Relationship With Processing Capacity Utilization

Apr 06, 2023

Researchers from the University of Tennessee Institute of Agriculture and Mississippi State University teamed up to investigate the interaction of national slaughter and price spread—the difference between the value of live cattle price and wholesale boxed beef—that ensued following temporary closures of beef processing facilities in recent years.

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.

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Video: What Does 20 MILLION Hogs a Year Look Like?

?? The Multi-Plant System Processing 20 Million Hogs Annually in the Midwest JBS USA operates multiple large-scale pork processing facilities across the Midwest, including major plants in Iowa, Minnesota, and Indiana. Combined, these facilities have the capacity to process approximately 20 million hogs annually.

Each plant operates high-speed automated slaughter systems capable of processing up to 20,000 head per day, followed by fabrication lines that break carcasses into primals, sub-primals, and case-ready retail products.

Hog procurement is coordinated through electronic marketing platforms that connect regional contract finishing operations and independent producers to plant demand schedules. This digital procurement system allows for steady supply flow and scheduling efficiency across multiple facilities.

Processing plants incorporate comprehensive food safety systems, including pathogen intervention technologies, rapid chilling processes, and integrated cold-chain management. USDA inspection is embedded throughout the harvest and fabrication stages to ensure regulatory compliance and product integrity. Finished pork products — from bulk primals to retail-ready packaged cuts — are distributed through coordinated logistics networks serving domestic and export markets.