In this file:
· ‘We’ve had this fear for years’: After Tyson fire, cattle producers look for options as prices tumble
· Major US beef abattoir fire could disrupt beef and cattle markets
‘We’ve had this fear for years’: After Tyson fire, cattle producers look for options as prices tumble
By Sherman Smith, Leavenworth Times (KS)
Aug 12, 2019
Cattle producers braced themselves Monday for tumbling market prices and ongoing uncertainty over the loss of meat processing operations at the Tyson plant in Holcomb.
Extensive damages from the Friday night fire closed the plant indefinitely, leaving cattle producers scrambling to look for alternatives.
Industry insiders said the Holcomb plant was responsible for processing about 6,000 cattle per day, which accounts for about 6 percent of all the cattle processed in the United States.
Larry Jones, a Finney County commissioner and partner at J&O Cattle Co., watched the flames that wreaked havoc on the plant from his home a half-mile away.
“I knew Friday night, looking at the flames and everything, this is not good,” Jones said.
With a record number of cattle headed to market, Jones said, meat packing plants already were running at capacity.
“It’s always been a concern of everybody,” Jones said. “The packing capacity has not expanded with the cattle numbers. We’ve had this fear for years.”
In the first day of trading since the fire, cattle futures on Monday dropped $3 per hundred pounds, the maximum fluctuation allowed for a single day.
Based on typical market weights of 1,400 pounds per head, an extended drop in prices would mean a cattle producer with 1,000 cattle will lose $42,000 per day.
“Anybody that had cattle that were not priced, that were waiting in the feedlot to be sold, their inventory already went down in value, so that kind of disruption has already occurred,” said Glynn Tonsor, an agricultural economics professor at Kansas State University.
Tonsor said it was difficult to assess the long-term impact without knowing how long the Holcomb plant will be down. The cattle that would have gone to the Holcomb plant will have to be re-routed, he said, and the associated costs will apply downward pressure on cattle prices.
“You’re talking more hours, more shifts, pushing those plants harder,” Tonsor said. “The cost to operate those other plants is going to go up because of labor and transportation.”
Tyson said it intends to rebuild, but the extent of damages and timeline for restoring operations is unclear.
“We’ll work to help our valued supplier partners find alternatives for their livestock during this ordeal,” said Worth Sparkman, a spokesman for Tyson.
Lee Reeve, owner of Reeve Cattle Co., which operates a feed yard in Garden City, said the nearest Tyson plants in Amarillo, Texas, and Lexington, Neb., are more than 200 miles away.
Cattle producers will find options, Reeve said, and prices eventually will reach parity. Still, he expects the loss of Tyson operations in Holcomb to “impact the whole industry.”
“It will adjust, but yeah, there’s a lot of anxiety,” Reeve said. “And it’s coming from a lot of different areas.”
Cattle producers already were dealing with uncertainty from trade relations and rising corn prices, Tonsor said. However, he also said the industry is large and diverse enough to withstand short-term diversity…
Major US beef abattoir fire could disrupt beef and cattle markets
Jon Condon, BEEF Central (Australia)
August 12, 2019
A FIRE which destroyed one of the largest beef processing facilities in the United States on Saturday (Australian time) has the potential to disrupt beef and cattle markets, analysts say.
Fire, believed to have started in a carton manufacturing area, swept through the 6000-head per day Tyson Foods Garden City facility in Kansas, closing the plant indefinitely. The plant employs about 3800 staff.
On Monday Tyson announced it would rebuild the plant, and will pay employees in the interim.
“Officials are still assessing the damage, so it’s too early to establish a timeline, but work to clear damage has already begun,” a company statement said.
The closure is already disrupting US cattle markets, at least temporarily.
US Live cattle futures prices fell the daily limit on Monday morning, as the closure means less demand for cattle in the immediate term.
Len Steiner’s Daily Livestock Report suggests the event had the potential to cause significant disruptions to both US beef and cattle markets.
Based on annual data collected by Steve Kay’s Cattle Buyers Weekly, a publication that for decades has kept meticulous records of US plant packing capacity, the Garden City plant near the town of Holcomb, Kansas can harvest about 6000 head of fed cattle per day or 30,000 head per week, representing about 6pc of overall US fed cattle packing capacity.
“That’s a significant number, considering there is very little capacity slack in the beef processing industry at this time,” the Daily Livestock Report said.
The chart published here shows US fed cattle packing capacity among the main competitors. Top packers currently processed somewhere between 84pc and 88pc of all fed cattle in the US, DLR estimated.
Tyson Foods is currently the biggest beef packer in the US, accounting for around 29pc of fed cattle packing capacity in the country.
“Given its size, the company is a major supplier to both US retail and foodservice customers,” Daily Livestock Report said.
“The short term effect is that with 6pc of processing capacity going dark there will potentially be less beef available in the market.”
“End-users that normally would get product from this plant now will be serviced by others, but that will limit supplies in the spot market. Higher prices will be necessary to either ration-out some demand or cause other packers to run extra shifts. Supplies in the spot market will likely be very light, which normally results in a bidding war from those that are short,” DLR said.
The fire happened at a time when US retailers are gearing-up for Labor Day holiday promotions, a time when US beef demand generally gets a boost.
“The USDA Choice grade beef cutout has been trending higher recently, and this disruption will likely cause prices to advance further,” DLR said.
As for the impact on fed cattle prices, it was generally negative, although the extent of the impact would depend greatly on how long it took to bring the plant back to full production.
“As distinct from pigs, where supplies can quickly back-up and result in dramatic price declines, beef feedlot operators have a bit more flexibility. But the effect could quickly increase, the longer this plant stays out of commission and it becomes necessary to adjust the flow of cattle through the entire supply chain,” DLR said.
“For that to happen, higher prices will be needed at the consumer level and lower prices at the producer level.”
A Tyson spokesman said the company was taking steps to move production to alternative sites.
“Tyson Foods has built in some redundancy to handle situations like these and we will use other plants within our network to help keep our supply chain full,” a statement said...
more, including chart