Increase in U.S. packing capacity is good news for the beef businessIncrease in U.S. packing capacity is good news for the beef business
February 2, 2015
USDA’s recent Cattle Inventory report verified what just about everyone in the beef business strongly suspects—the cattle herd is on the rebound. We saw strong indications all last year, with fewer heifer placements in feedyards and a sharp reduction in cull cow slaughter.
That’s good news for the cattle and beef complex, because it means we’ll eventually increase cattle numbers to a point where we won’t abuse our consumers quite so much when they pay for the product we produce. But for the short term at least, it might not be such good news for packers, because it means that a very short supply of cattle will be even smaller before it eventually gets bigger.
That makes recent developments in both the Midwest and the Northwest all the more interesting, and all the more positive for producers not just in those regions, but nationwide.
In the Midwest, two packing plants will soon be on line. Iowa Premium Beef in Tama, Iowa, has resurrected an existing facility and plans to process up to 1,100 head per day. Meanwhile, LimeSprings Beef in Lime Springs, Iowa, is set to fire up as well. It’s much smaller, aiming to process about 540 head per week, with the meat targeted at high-end restaurants and butcher shops in nearby cities.
And then there’s the Northwest, with what looks like a brewing battle between two giants in the beef business.
In early January, J.R. Simplot Company in Boise, Idaho, announced a $100 million joint venture with Caviness Beef Packers, based in the Texas Panhandle, to build a new beef plant near Kuna, Idaho. Slated to begin operating in fall 2016, the plant will primarily process cull beef and dairy cows from the Intermountain West.
Then, just last week, JBS announced a $75 million project to expand the capacity of its Hyrum, Utah, beef plant. According to JBS, the plant harvests around 500,000 head per year and the expansion will increase its capacity by around 400 head per day. The expansion will, among other things, include a new ground beef facility, which clearly targets the cull cow market. JBS anticipates the expanded facility will be operational in spring 2016.
While there may very well be more at play here than we know, given that the announcements came so close together, its clearly good news for western ranchers and dairy producers. And the news is equally as good for Midwestern cattle feeders.
That’s not to say that all is rosy in the beef packing sector, as plant closings the past few years indicate. A proposed plant in South Dakota never came to fruition for a variety of reasons. And other regions of the country, such as the Southern Plains and Southwest, continue to battle drought. That drought will continue to be a major factor in those regions’ ability to keep up with the Midwest, the Northern Plains and the Northwest in cattle numbers.
But the indications are clear. Packers expect to have more cattle around them in the coming years and the battle cries have been lifted to see who will compete for those cattle.
And that’s good news all the way around for cattle producers.
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