On Aug. 13, we saw another major blow to the packing industry with announcement of more major plant closures. With low cattle inventories and margins becoming increasingly tight, Tyson Foods announced that they will be closing their facilities in Joslin, IL, their case-ready facilities in Eagle Mountain, UT, and that they will be putting their plant in Pasco, WA, up for sale after closing their operations in Lexington, NE, earlier this year.
These decisions mean the major packer will anchor its beef operations in Dakota City, NE; Holcomb, KS; and Amarillo, TX. This will be a major blow to those areas that rely on the plants for employment. Closing the Joslin facility is also looking to be a major blow to those farmer feeders out in Illinois, Indiana, Michigan and Ohio.
Every time we get one of these devastating announcements that come out about one of these plants closing, I am reminded of the last time we went through this stage in the cycle. Way back in the summer of 2012 when I was a student at Texas Tech University, I was eager to see every end of the cattle business, so I took an internship at a 40,000-head feedlot in Tulia, TX. The heart of the drought still had its hold onto Texas at that time; inventory was short, but the cattle feeders were doing well. With the low cattle numbers across the nation, that yard had to rely on Holstein steers and Mexican cattle to keep the pens full on the southern Plains.
My time on the processing crew was mainly spent knocking the horns off wild, long-eared M-branded cattle. This was quite the eye opener for an eastern Montana kid. The crew was always surprised and excited when we got a good set of northern bred steers in because there weren’t many to be found at that time. Most of the cattle they fed went to Cargill in Plainview, TX.
I still remember clear as day a conversation I had with one of the managers one evening as we were finishing up. It was no secret that the plants were in the red on most of the cattle they were buying at the time. The feedlot was making huge profits. That manager said his only worry was he hoped he didn’t put the packer out of business with the high prices they were bidding. His worry came true; Cargill in Plainview closed the doors in January the following year, leaving a 4,000-head-a-day void in the market. That feedlot lost its closest and biggest buyer. That feedyard sold in the upcoming years.
We saw that trend continue through 2015 with five other major plants closing across the U.S., losing capacity for over 11,000 head a day. As we saw the herd rebuild at that time, that certainly didn’t help the market hold as supplies grew and there was less competition from the packers bidding on those higher volumes of cattle.
I think everyone that was in beef business still remembers what happened to the market between 2014-16. Hearing the news of these plants closing doors in modern times isn’t the most comforting thing to read about. Closing the doors in Joslin, IL, compounded with the closure of the Souderton, PA, JBS plant will be hard on those smaller farmer feeders in that part of the world. I hope they stay in the market and continue to feed cattle. We really need those smaller farmer feeders in that part of the country.
I still feel like even with these plants closing doors and cutting shifts and all the other scary news that seems to keep coming out, we aren’t looking at a crash like we saw back then. The rebuild this time is moving slower than it was 10 years ago. The fundamentals are still in favor of the cow-calf producer. Much of the West is in severe drought conditions, which also isn’t going to speed up the rebuild any time soon. These plants also keep innovating with their current locations to run more efficiently to fill the gap that these closures have created.
With announcements, there is some bright news. They aren’t just shutting the doors on the Pasco, WA, facility, as it is announced as being for sale. I really hope somebody takes the opportunity to acquire this facility and keep it running for those producers and feeders in the Northwest. I hope somebody or a group takes the chance to invest in the greatest industry in the world: the beef business. — KEVIN MURNIN
