The U.S. beef processing sector will continue to suffer from overcapacity even after Tyson Foods closes its Lexington, NE, plant on Jan. 20 and reduces its Amarillo, TX, plant to a single full capacity shift. These actions will remove 7,700 head of maximum daily slaughter capacity, as the Lexington plant has a capacity of 4,800 head per day and the Amarillo plant has a capacity of 5,800 head per day. However, my data shows that the largest 76 plants in the U.S. in late 2024 (from 7,000 head per day down to 20 head per day) had a total capacity of 135,480 head per day.
Two new plants began operations this year. They included America’s Heartland Packing in Wright City, MO, and Sustainable Beef in North Platte, NE. These added 2,400 head per day and 1,500 head per day, respectively, although they are currently operating far below these levels. Subtracting the Tyson plants’ capacity changes from the 76-plant total means a total of 127,780 head. Adding the full capacities of the two new plants means a new total of 131,680 head in 77 plants.
Tyson’s announcement on Nov. 21 took many by surprise, as most observers believed the four major beef processors would “tough it out” until cattle supplies began to increase. But Tyson’s actions seem to indicate that it believes any meaningful increase in numbers won’t occur for several years. Secondly, it appears focused on improving capacity utilization at its Amarillo plant and its four other plants (Dakota City, NE; Finney Country, KS; Joslin, IL; and Pasco, WA).
To meet customer demand, production will be increased at other company beef facilities, optimizing volumes across its network, Tyson said in a statement. Tyson Foods recognizes the impact these decisions have on team members and the communities where it operates. It is committed to supporting workers through this transition, including helping them apply for open positions at other facilities and providing relocation benefits. The Lexington plant employs nearly 3,200 people. The transition in Amarillo is expected to impact 1,700 workers.
Weighing on Tyson’s mind likely was the beef segment’s operating income loss of $426 million in fiscal 2025. This was a record annual loss and went against a $381 million loss in fiscal 2024. Tyson also said it paid $1.840 billion more for cattle in 2025 than in 2024. Its five-plant capacity after the changes are made will be 18,100 head per day. This would put it fourth in capacity terms behind Cargill Protein, whose current capacity is 23,000 head per day in six plants. JBS would remain No. 1 with 29,000 head of daily capacity in nine plants. After Tyson bought the former IBP plant, it closed four plants from 2006 to 2009.
The announced closure of the Tyson plant in Lexington will impact producer leverage, says Andrew Gottschalk, HedgersEdge.com. However, in the short term, the excess slaughter capacity in this industry should be able to absorb these cattle into other plants. The greater concern arises when cattle inventories expand, and they will, he says. Jeff Stolle, Nebraska Cattlemen’s Association director of marketing, predicts the Lexington plant closure will reduce Nebraska’s cattle harvest capacity by 15%. The Tyson plant in Lexington has been a valuable and consistent piece of the packer processor infrastructure in the state for 35 years and to lose this amount of harvest capacity on a daily basis is definitely going to be a challenge, he says. The announcement is a shock as Stolle says there are significant feedyard expansion projects in the works. He hopes there’s a future opportunity to bring the Lexington facility online with different ownership, he says.
Don Close, Terrain senior animal protein analyst, says the announcement comes following a rough year for the meatpacking industry and says a plant closing has been a possibility for the last 18 months.Fed beef packers have been losing an average of $200 per head. Those margins have certainly improved over the last two or three weeks, but it has been a tough year, and he doesn’t know that the sector is near the end of this yet. Elliott Dennis, University of Nebraska-Lincoln livestock and meat economist, predicts Tyson targeted its least efficient plant for closure to maximize profitability across its operations, highlighting the importance of operational efficiency in the beef industry. — Steve Kay, WLJ columnist
(Steve Kay is editor/publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707-765-1725. Kay’s Korner appears exclusively in WLJ.)
