Cattle producers, feeders, and packers are unlikely to feel the impacts in the short term of Walmart’s much-publicized entrance into the beef business, a new report from CoBank says.
“While Walmart’s new beef strategy could make waves for the industry in the future, in its current state we don’t see it shifting the price and leverage dynamics of U.S. beef production,” said Will Sawyer, an animal protein economist with CoBank. “By our calculations, this new supply chain will account for less than 5% of Walmart’s U.S. beef business and less than 0.5% of U.S. beef production.”
But competitors will be keeping a close eye on the new development. “If Walmart’s new case-ready plant and Angus supply chain succeed, it could mean Walmart takes another step up the supply chain towards the producer,” CoBank said. “That could be in the form of harvesting fed cattle, as Costco has done in chicken, but it could also be via a joint venture with a current packer.”
In January, after establishing its own Angus supply chain, Walmart opened a case-ready beef plant in Georgia to supply about 500 stores in that state, Alabama and Florida.
Walmart’s move differs from Costco’s opening of a chicken plant, the bank said. Where Costco wants to address “supply chain challenges ranging from costs to product specifications, Walmart’s stated goal for the Angus supply chain is to ‘improve the quality of its food offering.’ To offset the additional cost of production, these Walmart-produced steaks and roasts will need to carry a premium price.”
The report called Walmart’s beef strategy “more of a test — not only for Walmart and its suppliers, but also its customers — that could lead to much bigger and more significant investments in the future.”
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