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Monday, February 10, 2014

National Beef Brawley plant to close in April

by Kerry Halladay, Associate Editor
Along with high retail prices that threaten consumer demand for beef and feeder and packer margins, the historically tiny U.S. cattle herd has claimed another victim.

On the last day of January, National Beef—the fourth ranked beef packer in the U.S. in 2010— reported it will be closing its beef processing plant in Brawley, CA, in early April. According to the company’s announcement on the decision, the plant’s final production day will be April 4, though the fate of the facility, which was built in 2001, is as yet unknown.

The Brawley plant was acquired by National Beef in 2006 and has a 2,000 head per day capacity. According to Steve Meyer and Len Steiner of the CME Daily Livestock Report, the Brawley plant represents almost 14 percent of National Beef’s output in the first three-quarters of 2013.

National Beef cited a declining availability of fed cattle in the area as reasoning for the plant’s closure. That is nothing new, and the Brawley plant is not the first, nor will it likely be the last plant to be force to close for such reasons. According to the Cattle Inventory report, the overall cattle herd (beef and dairy) is at the lowest point seen since 1951, and the 2013 calf crop—an indication of future availability—is the smallest since 1949.

“While the closure of the Brawley facility itself may be a bit of a surprise to some industry observers, the closure of a beef slaughter facility should really be no surprise at all,” commented Meyer and Steiner.

“Declining cattle numbers have put both the feedlot and slaughter sectors in a position of overcapacity and, while the U.S. beef cow herd may grow over the next few years given current profits and generally better range/pasture conditions, we know of hardly anyone who would expect it to grow enough to support the current number and capacity of either feedlots or packing plants. In fact, we doubt that this will be the last plant closure as the sector adjusts to smaller cattle numbers.”

Though the volume of fed cattle might not be high enough to maintain the Brawley plant, its closure will be a big blow for cattle feeders in that area as processing plants are few and far between.

According to Steve Kay—of Kay’s Korner fame in these pages—cattle feeders in California are far more limited now in their access to processing facilities. He reported there are a pair of cow processing plants, one in Southern California and one in Central, a small 300-head per day plant near Los Angeles, and Cargill’s Fresno plant which processes both fed cattle and non-fed cattle. Beyond that, the nearest options are several states away in Colorado or Texas; long distances to truck cattle.

Bill Brandenburg, a cattle feeder in El Centro, CA, and part of the group that helped finance the Brawley plant’s original construction, said that there is a plant near Phoenix, AZ, which could take Southern California cattle, but that their capacity was too small to handle both Arizona and Californian fed cattle.

“We’re pretty much stuck with nowhere to go and obviously we can’t pay the freight to ship cattle 1,200 miles from here to the Texas Panhandle or Kansas to kill them,” he said.

When asked what sort of impact the Brawley plant’s closure will have on area feeders, Brandenburg was very concise; “It will wipe us out. There won’t be anymore.”

He estimated that, if the plant remains shuttered to April 2015, the approximately 400,000 head of cattle in the Imperial Valley in Southern California will decline to 100,000 head or less.

“There’s no place else to kill our cattle, so why would you feed cattle [in California]?” The closure of the plant will of course have an immediate effect on its 1,300 employees. National Beef’s announcement of the closure focused largely on the future of its team members.

“This was a very difficult decision for us to make because of the impact on our employees and suppliers,” said Tim Klein, Chief Executive Officer, National Beef.

“We have a committed, hard-working team of employees and suppliers in Brawley, and we truly understand the impact this will have on them,” continued Brian Webb, Vice President and General Manager, National Beef. “We are grateful for their service to our company and we will work closely with them during this transition.”

According to the compan y ’s a nnouncement, displaced employees will be “offered support, including assistance finding employment at other National Beef facilities.”

But more than just the employees, the closure of the Brawley plant has the potential to effectively shutter the entire area, economically speaking.

Brandenburg explained that Imperial County borders Mexico and the county’s unemployment rate is normally very high compared to the rest of the country, often around 20-25 percent. Being a very rural area, cattle production and farming are the major industries which are all very interconnected. Lay low the cattle portion of the community and the rest will fall.

“It’s a farming community too,” he said. “Half a million acres in farmland so of course it’s going to have a devastating effect on the farmers too because there won’t be feedlots to buy up the roughages and other things. There won’t be any manure for their crops— they grow a lot of organic things like that here—so it’s going to have a huge impact.”

“In a small county like ours, to lose 1,300 jobs at the packing house and another couple thousand jobs in feedlots and related businesses, that’s a huge blow to Imperial County,” lamented Brandenburg.

“The effect from this whole thing, if [the Brawley plant] goes dark and remains dark, is going to be just humongous. It’s going to be devastating.”

He mentioned there are efforts to keep the plant going, but that things are too far out to tell what might happen.

“We just have to keep putting one foot in front of the other and just keep on chugging and hope that something breaks so we can get a deal worked out to keep this thing open.” — Kerry Halladay, WLJ Editor

 
 


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