“This is a difficult time for our team members and their families, and we want to ensure they’re taken care of.” So said Steve Stouffer, group president of Tyson Fresh Meats, in an August 12 news release following an August 9 fire at its Holcomb, Kan. beef packing plant that partially destroyed the operation.
“We’re taking steps to move production to alternative sites,” Stouffer said. “Tyson Foods has built in some redundancy to handle situations like these and we will use other plants within our network to help keep our supply chain full.” The plant will be down indefinitely, however; the company plans to rebuild the plant at the same location. Officials are still assessing the damage, so it’s too early to establish a timeline, but work to clear damage has already begun, according to Tyson’s release.
Meanwhile, fed cattle processing capacity will be strained to handle record available supplies, according to the Kansas Livestock Association (KLA). The plant operated at about 6,000 head of fed cattle per day, leaving a shortfall in the national packing capacity of 30,000 head for a five-day work week.
According to CattleFax, that amounts to 6% of total U.S. fed cattle packing capacity the rest of the processing industry will need to absorb. The plant represents 23.5% of Kansas fed cattle packing capacity.
Based on CattleFax analysis, shifting the supply to other plants in Kansas, Texas, Colorado, Nebraska and Iowa will mean capacity in those regions needs to run 8% to 8.5% higher. The market analysis service reports this will be difficult to make up based on current packing industry infrastructure.
CattleFax suggests the significance of this event is amplified by the growing supply of finished cattle both nationwide and in Kansas. The U.S. cattle on feed total in feedyards with 1,000 or more head capacity was record large at 11.5 million head July 1. Cattle on feed in Kansas as of July 1 stood at 2.4 million head, which was also a record and represented about 21% of U.S. total.
Potential market impacts predicted by CattleFax include a possible loss of currentness in the cattle feeding segment; cattle feeders could lose some market leverage and all classes of cattle could see more price risk. Some of the pressure could be alleviated if existing harvest capacity dedicated to cows and bulls is incentivized to process fed cattle and if plants have the cooler, boxed beef capacity and labor to process cattle on weekends.
KLA has been in contact with Tyson and Kansas Gov. Laura Kelly's administration regarding the situation, the association said in its news release. This communication will continue as KLA works with both sides to address any obstacles standing in the way of bringing the facility back on-line as quickly as possible. Gov. Kelly has expressed the state's full support to Tyson President and Chief Executive Officer Noel White.
Over the weekend, KLA asked NCBA to make the Commodity Futures Trading Commission aware of the situation. NCBA made contact with the regulatory agency and contacted the office of U.S. Ag Secretary Sonny Perdue to apprise USDA of the plant fire.
Meanwhile, all full-time, active employees at the plant will be paid weekly until production resumes, according to Tyson. Stouffer said the team members may be called on to work during this time to help with clean-up and other projects, but regardless of the hours worked, all full-time active employees are guaranteed pay.
Stouffer commended plant management for quickly and efficiently evacuating the building. As a result of their actions, there were no injuries reported during the fire. Tyson Foods operates six plants in Kansas, employing more than 5,600 people. In the company’s fiscal year 2018, it paid $269 million in wages within Kansas and estimated its total economic impact in the state to be more than $2.4 billion.