The risk fellows recently heard from Randy Blach, CEO of CattleFax. Mr. Blach gave an overview of the business model for CattleFax and the beef industry.
CattleFax has evolved over its nearly 50 years of existence from a company which primarily dealt in data collection and sharing to a company focused on delivering research driven information to its members. This has included reorganizing their group of analysts from being more general to having resident experts in specific areas.
CattleFax works with numerous member companies spanning the entire beef industry. Their goal is to provide information to producers from Cow/Calf operations to beef packers. Mr. Blach stated that CattleFax’s customers are very different companies with different levels of risk tolerance. He said that CattleFax was not in the business of advising them on a level of risk to take but of ensuring they made educated decisions that fit their goals.
Mr. Blach’s comments on the beef industry were equally insightful. He described how increased volatility and increased capital requirements have changed the beef industry recently. Only a certain amount of increased costs of production can be passed along to the consumer without losing large portions of market share, so the industry often leads to producers tolerating periods of negative margins. A major driver of the future beef industry is going to be exports. Projections show that by the year 2020, 20% of America’s beef production could be exported.
– Garrett Lister & Jeff Cather