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Fewer cattle, fewer meat-packing plants

Shrinking herds means less beef to process and shuttered facilities

Meat-packing plants are the lifeblood of many rural communities in North America. So the impact of a plant closure is often felt more by local businesses than by livestock producers who supplied the plant. It wasn’t always that way for producers. Even in the early 2000s, groups on both sides of the border worked to get new beef-processing plants built in the belief this would put more money in producers’ pockets.

How wrong they were and how events have changed in the last five or six years. Building a plant was never a guarantee of anything, as the backers of Ranchers Beef in Alberta and Northern Beef Packers in South Dakota found out. The Ranchers plant looks likely to reopen late this year, which is great news for producers and cattle feeders. But the NBP plant in Aberdeen will likely be dark for a long time.

What changed is a shrinking herd on both sides of the border and in Mexico. The three countries had a combined 128.74 million cattle on January 1, 2010. By January 1 this year, this number had fallen 11.04 million head or 8.6 per cent. The impact has been threefold. It has pushed the price for all beef cattle to new highs. It has forced feedlots to close or run at reduced capacity, and it has forced beef plants to do the same. Another impact is on the hundreds of companies that supply products and services to the industry. It’s hard to measure this impact financially. But if each animal uses $100 worth of products and services, that’s a $1.1-billion hit in four years.

The Ranchers plant closed in August 2008. Later came closures by XL Foods of its Moose Jaw, Sask., plant two years later and its fed beef plant in Calgary, Alta., in May 2011. This left the province with only two large fed beef plants. Along with the COOL-related difficulties of selling slaughter cattle to the U.S., this left cattle feeders in Western Canada with fewer marketing opportunities. But the red-hot U.S. market this year has lifted prices on the Prairies and made cattle feeders much happier. Moreover, the demand for Canadian cattle is likely to continue to grow.

The first major realignment of capacity with supply in the U.S. came in 2006 when Tyson Foods closed two slaughter-only plants, in West Point, Neb. and Boise, Idaho. Such plants were by then something of an anachronism so these closures came as no surprise. But they might have remained open if the cattle had been there. Tyson’s big move though came in February 2008 when it closed its Emporia, Kan., plant. This had a processing capacity of 4,000 head per day so was the first sign that U.S. fed beef processors needed to make tough decisions to protect their other plants.

Cargill took such a decision in February last year when it shuttered its 4,650-head-per-day plant in Plainview, Texas. Catastrophic drought in the region and in northern Mexico had reduced available cattle numbers at both the ranch and feedlot levels by more than the plant would harvest in a year. Cargill has another large plant 90 miles away in Friona so its decision was made partly to protect that plant.

Closures since then have accelerated on both the fed and non-fed (cow) side. Another 11 plants have closed. They and Plainview represented 12,750 head of daily capacity. Capacity nationally is now much more in line with cattle supplies but there’s no guarantee that more plants won’t close next year. Each will be a loss to their community and to the industry.

About the author

Contributor

A North American view of the meat industry. Steve Kay is publisher and editor of Cattle Buyers Weekly.

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