Cargill today announced that it will idle its Plainview, Texas, beef processing facility effective at the close of business, Friday, Feb.1, 2013, resulting primarily from the tight cattle supply brought about by years of drought in Texas and Southern Plains states. Approximately 2,000 people work at the Plainview facility, and they will receive company support.
"The decision to idle our Plainview beef processing plant was a difficult and painful one to make and was made only after we conducted an exhaustive analysis of the regional cattle supply and processing capacity situation in North America," said John Keating, president of Cargill Beef, based in Wichita, Kan. "While idling a major beef plant is unfortunate because of the resulting layoff of good people, which impacts their families and the community of Plainview, we were compelled to make a decision that would reduce the strain created on our beef business by the reduced cattle supply. The U.S. cattle herd is at its lowest level since 1952. Increased feed costs resulting from the prolonged drought, combined with herd liquidations by cattle ranchers, are severely and adversely contributing to the challenging business conditions we face as an industry. Our preference would have been not to idle a plant."
Cargill says its remaining beef cattle processing plants in the region, at Friona, Texas; Dodge City, Kan. and Fort Morgan, Colo., will receive cattle that were previously destined for processing at Plainview. The company’s regional beef facilities at Fresno, Calif.; Milwaukee, Wis.; and Wyalusing, Pa., as well as its beef plant in Schuyler, Neb., and two beef plants in Canada, are unaffected.
"Given the over-capacity 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 to meet our customers’ requirements, while helping us maintain our position in the U.S. beef sector," explained Keating. "Our long-term commitment to U.S. beef production is unwavering. Over the past 10 years we’ve invested more than $766 million in our U.S. beef plants to ensure they remain best in class in the industry."
The plan to idle Cargill’s Plainview facility includes measures for preserving its infrastructure for potential reopening if the U.S. cattle herd rebounds and requires additional processing capacity. However, Cargill said it does not expect the U.S. cattle herd to significantly increase in size for a number of years.
"We delayed the decision to idle Plainview as long as possible, due in part to our outstanding team and ongoing excellent support from the community. We were also hoping the drought would break, pasturelands would be restored, cattle ranchers would retain heifers and the national herd trend of declining numbers over the past few years would be reversed," stated Keating. "Unfortunately, the drought has not broken, feed costs remain higher than historical averages and the herd continues to shrink. The industry has experienced this cycle in the past, although this one is longer and more severe than most. Nevertheless, we are optimistic about the long-term prospects for U.S. beef demand from American and international consumers, and that the drought in Texas and the Southern Plains will become a memory."
Juli says: Cattle futures swiftly turned sharply lower on the news, although the news ultimately serves as a reminder of the tight supply situation.