Cargill Inc., the largest U.S. beef processor, will idle a Texas processing plant after the size of the cattle herd fell to a 60-year low and years of drought increased feed costs. Cattle futures dropped.
The Plainview plant will stop operations at the close of business on Feb. 1 to reduce the strain on the company’s beef business, John Keating, president of Cargill Beef in Wichita, Kansas, said today in a statement. The plant employs 2,000 people and those affected by the closing will get help finding jobs elsewhere, Minneapolis-based Cargill said in the statement.
“Given the overcapacity that exists with four major beef plants in the Texas Panhandle and a dwindling supply of cattle in the region, idling Plainview will allow Cargill to operate its other beef plants in Texas, Colorado and Kansas more consistently on a five-day-per-week basis,” Keating said.
The U.S. beef-packing industry has 10%-15% excess capacity, with the highest level in the Southern Plains where Plainview is located, said David Nelson, an agricultural global strategist for Rabobank. Herd liquidation intensified in that region during the 2011 drought, he said.
“The industry does need to rationalize capacity to match up to lower cattle supply,” Nelson said in a telephone interview today. Idling the Plainview plant will help Cargill “alleviate that situation,” he said.
Cattle futures for April delivery fell by the 3-cent exchange limit to $1.297 a pound earlier today on the Chicago Mercantile Exchange, while feeder-cattle futures for March settlement declined by the 3-cent exchange limit as well.
Cargill’s remaining beef-cattle processing plants in Texas, Kansas and Colorado will receive cattle destined for Plainview, according to the statement. Cargill beef facilities in California, Wisconsin, Pennsylvania and Nebraska and two plants in Canada are unaffected.