Meat Matters
Are packing plants on the endangered species list?

Are packing plants on the endangered species list?

Meat plants used to be a key part of the economy of hundreds of rural towns and several large Midwest cities. But the structure of the beef industry began to change radically in the 1960s, after brand-new company IBP built a new plant in a cornfield in Denison, Iowa.

That plant’s closure on Aug. 14 thus marked the end of an era for IBP, which became part of Tyson Foods in 2001. More importantly, it continued a series of closures that rival those in the late 1990s. Nine processing plants have closed since the start of 2013, representing a daily slaughter capacity of 14,850, or 3.7 million annually, based on 250 operating days.

The statistics reveal the impact of shrinking cattle numbers from 2007, a decline exacerbated by widespread drought from 2010 to 2012. The U.S. cattle population had only three years of modest expansion until 2007. Then numbers fell by 8.843 million until 2014. This forced Cargill in February 2013 to close its Plainview, Texas, plant, taking out 4,650 in daily capacity. This was the largest plant to close. Three other fed beef plants closed after that.

The drought also sharply reduced beef cow numbers to their lowest level since 1941 on Jan. 1, 2014, so five beef cow plants also closed. My data indicate that 50 plants have closed since 1995, taking out 52,695 in daily capacity. Only 1998-2000 saw more than the 2013-to-present closures. That’s when 18 plants closed that had a daily capacity of 17,603.

Total commercial cattle slaughter in 2015 will fall below 30 million for the first time since 1963, when it totaled 27.232 million. This year’s total is expected to be down 4% to 5% from 2014. Several other plants might thus struggle to remain open. For fed beef packers, 2015 fed steer and heifer slaughter is expected to decline about 3.5%, or 850,000, from last year. Weekly steer and heifer slaughter this year might be as low as 442,000. That’s against 525,000 in 2010.

By comparison, the largest steer and heifer slaughter going back to 1965 was in 2000, when the number averaged 580,000 per week. Total cattle slaughter that year averaged 698,000 per week. The industry’s biggest-ever slaughter was in 1976, when commercial slaughter totaled 42.654 million. Weekly cow and bull slaughter that year was nearly twice that of current slaughter levels. Cow slaughter in 1976 averaged 191,000 per week, vs. 102,000 so far this year. Bull slaughter averaged 18,000 per week, vs. 9,000 so far this year.

Given the mid-1970s cattle numbers, U.S. beef processing plants were designed to handle large numbers. There are still seven plants with the capacity to handle 6,000 per day. Such numbers back then enabled beef packers to operate five days per week on two shifts and at least a full shift on Saturdays. But Saturday operations have steadily declined in recent years as available cattle numbers fell.

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The Saturday slaughter total in 2014, including holiday weeks, averaged 16,395 per week. This was down from 26,763 in 2013 and 45,226 in 2007. So far this year, Saturday kills have averaged 9,885. Plants are also running reduced hours Monday through Friday. Tyson’s plants will run at only 34 hours per week of production per shift in fiscal 2015, and ran at 35 to 36 hours in 2014.

Tyson and other fed beef processors expect to operate at slightly higher levels in 2016, as fed cattle supplies increase. But this is not likely to start until March or April. Fed beef processors will struggle to make money this year, which puts some plants on the “endangered species” list.

Steve Kay is editor and publisher of Cattle Buyers Weekly. See his weekly cattle market roundup each Friday afternoon at beefmagazine.com.

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