cargill closes tx feedlot

Cargill Closure Announcement - How Much Can The Industry Afford?

Cargill announced this week that it plans to close its Lockney, TX, feedyard, located about 45 miles northeast of Lubbock, next summer. News about the closure of the feedyard that employs 45 workers and boasts a 62,000-head capacity isn’t surprising. After all, Cargill announced the closing of its Plainview packing plant, which is nearby, in January of this year.

The closing of the Lockney feedlot isn’t an isolated situation. Estimates are that a total of 2,000 feedlots have shut down this year. The Lockney closing is significant, however, because it is a larger yard, and perhaps is indicative that the industry has now moved beyond the consolidation and concentration phase, and has begun to significantly reduce capacity.

The announcement of the Lockney closure mentioned persistent drought in the area as one reason for the closure. However, it’s probably more related to the long-term trend in falling cattle numbers, as well as the continuing disadvantages regarding water and feed basis of the Southern Plains feeding industry relative to their Northern Plains counterparts.

While it’s true that a lot of this idled capacity could be returned to production if and when conditions change, the consensus seems to be that the overwhelming majority of the infrastructure being retired won’t come back. It’s true that there’s a lot of talk about herd expansion, falling feed prices, new cattle price highs, and vastly improved moisture conditions in many areas. However, the bigger questions are just how much and when expansion will occur, and how much of the industry’s shrinking size is due to short-term conditions like drought, and how much is due to long-term structural changes like ethanol subsidies.

 

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There are questions on the demand front as well. Will we be able to rebuild and regain domestic market share, or will we continue to move off the center of the plate toward becoming a specialty diet item? Will our export levels increase, thus allowing for industry expansion, if domestic demand doesn’t improve sufficiently to support industry growth?

Finally, it comes down to timing. If we are going to expand, can we do it rapidly enough to avoid losing too much infrastructure? The loss of a critical mass of infrastructure would be a hindrance to rebuilding market share.

 

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