February 10, 2014

 

More US beef packing plants to close in next two years

 

 

In the next two years, up to three more US beef packing plants could close as the industry grapples with surplus packing capacity while ranchers try to rebuild the country's smallest herd in 63 years.

 

"To go from liquidation to expansion over the next two years, which we strongly feel we're in the process of doing, you're going to pull between two million and 2-1/2 million cattle out of the harvest mix by 2015 compared to 2013," Kevin Good, a senior analyst from CattleFax.

 

He said that given the decline, there is the risk that one to three packing plants could go in the next 12 to 24 months, depending on their size. Due to fewer cows being culled, resulting in a smaller supply for slaughter, he warned that cow processing facilities are at greatest risk.

 

Beef cow numbers in the US have declined 16 out of the past 18 years, according to Good. Since the year 2000, slaughter or harvest rates for steers and heifers have decreased about 1% per year, he said.

 

Due to high feed costs, coupled with drought and reduced consumer demand for beef, the US beef industry has been struggling in recent years.

 

As the industry moves through 2014 to 2015, the slaughter rate for steers and heifers will drop 2% to 3% as more heifers are being held back to replenish the herd, said Good, who projected cow slaughter rates would fall 8% to 10% a year in 2014 and 2015.

 

The USDA's annual cattle inventory report showed the total number of cattle in the US as of January 1 at 98% of where it was a year earlier, or 87.730 million head. It was the smallest herd since 1951 and down 2% from 89.3 million head a year ago. Analysts had forecast a 1.4% decrease.

 

Analysts said the data suggests that feed costs remained high in the first half of 2013 as historic drought in 2012 lingered, discouraging producers from retaining heifers. They believe ranchers held back more breeding stock as corn and hay costs came down in the second half of 2013.

 

The National Beef Packing Company recently announced April 4 as its last day of operation for its Brawley, California beef processing plant. The company cited tight supplies for the decision to close the facility, which has a slaughter capacity of about 2,000 head of cattle per day.

 

California, the nation's top dairy cow and 18th-ranked beef cow producer, is suffering through historic drought, the remnant of a prolonged dry spell which shrivelled crops and grazing pasture in the central and south-western US.

 

Cargill Inc. was prompted to shutter its Plainview, Texas, beef plant early last year due to scarce supplies and costly feed and has plans to close," feedlot in Lockney, Texas in the summer of 2014.

 

Good indicated the expected drop in the number of beef processing plants would mean a lot more cattle for remaining facilities.