CARGILL Inc. announced last week that it plans to "idle" its beef cattle plant in Plainview, Texas, effective at the close of business on Feb. 1, citing the tight cattle supply "brought on by years of drought" in Texas and the Southwest.
The closing affects a workforce of 2,000 people.
The decision was "difficult and painful" and was made pursuant to "an exhaustive analysis" of the cattle supply and plant capacity situation in the region and throughout North America, Cargill Beef president John Keating said.
It was a decision that "we were compelled to make to reduce the strain" created on the company's beef business by the continuing tightness in the U.S. cattle supply, Keating said.
The beef cow herd experienced its seventh straight year of liquidation in 2012 and will decrease for an eighth straight year this year, and the beef cow herd is now the smallest since 1952, meaning smaller and smaller calf crops and feeder supplies and tighter and tighter finished cattle supplies (Feedstuffs, Nov. 12, 2012).
The liquidation has been due to cow/calf producers, who are dealing with continuing drought that has destroyed hay harvests, pastures and ranges and led to record-high hay prices and land rentals for grass elsewhere, according to Feedstuffs sources. Drought has also driven corn prices to record highs and pushed feedlots to temper their bids for calves and yearlings, sources have said.
This has "adversely contributed" to challenging conditions in Cargill's beef business, Keating said.
Cargill's remaining beef cattle plants in Friona, Texas; Dodge City, Kan., and Ft. Morgan, Colo., will continue to operate and process cattle that were previously destined for Plainview, according to the announcement.
The company's further-processing plants in Fresno, Cal.; Milwaukee, Wis., and Wyalusing, Pa., as well as its beef plant in Schuyler, Neb., and its two beef plants in Canada, will not be affected, the announcement said.
Closing the Plainview plant will allow Cargill to operate its other beef cattle plants in the region more consistently on a five-days-per-week schedule to meet customer demand and maintain its position in the U.S. beef industry, the announcement said.
Over the last 10 years, Cargill has invested approximately $766 million in its U.S. beef plants, the announcement said.
Cargill has been the largest beef processor in the U.S., with a daily capacity to handle 30,000 head, according to the 2013 Feedstuffs Reference Issue & Buyers Guide.
The Plainview plant runs 5,000 head per day.
Cargill emphasized that its plans to idle Plainview include measures for preserving the plant's infrastructure "for potential reopening" if and when the cattle herd rebounds and requires additional capacity to be brought on line.
However, Cargill said it does not expect the beef cattle herd to increase in size significantly "for a number of years."
Keating said the company delayed its decision to idle Plainview "as long as possible" due to its established workforce and to "hopes" that the drought would break, pastures would be restored and cow/calf producers would begin herd rebuilding. Unfortunately, none of this has occurred, he said.
The industry has experienced this in the past, he added, but this liquidation is longer and more severe than most.
Nevertheless, Keating said, "we are optimistic for the long-term prospects" of the U.S. beef industry.