The loss of Tyson Foods’ beef processing plant in Holcomb, Kan., from a fire two weeks ago has had a major impact on beef and cattle markets and is an issue the beef industry is following closely.
In its sixth year of expansion, the U.S. beef industry already had challenges, Kevin Good, CattleFax vice president of industry relations and analysis, said in a conference call hosted by National Cattlemen’s Beef Association on Thursday.
The total number of cattle increased 6.2 million head during the expansion, and the number of cattle on feed on July 1 was up 1 million compared to the last five-year average, he said.
So there was a record number of cattle on feed before the fire. A disproportionate, large number of those were located in the southern and central plains partially due to a tough winter last year in Nebraska and Iowa, he said.
“So we’ve got big supplies from a historical standpoint (and) they’re located where this packing plant fire took place,” he said.
There’s also a bigger seasonal supply of fed cattle ahead, he said.
“So we were already set up from a supply standpoint and a cycle standpoint to have some tough sledding,” he said.
On the other side of the equation, the packing industry downsized between 2000 and 2015, taking out roughly 5.5 million head of capacity to be more in tune with a smaller slaughter herd, he said.
“In the last six years, we’ve seen increasing supplies where we haven’t been able to find many new shackle spaces. And therefore, we’ve got the squeeze or the leverage that is the challenge,” he said.
Tyson’s Holcomb plant killed roughly 6,000 head a day, representing about 6.2% of U.S. fed cattle slaughter. Assuming a total daily kill rate of 97,000 in the U.S. with the Tyson plant, loss of the plant would mean a kill rate of 91,000. Daily slaughter over the past two weeks has been 90,000 to 93,000, he said.
CattleFax thinks kills will be at 92,000 to 93,000 moving forward, which is above the stated slaughter capacity because some cattle will be harvested in two-way plants that can kill fed cattle and cows, he said.
“The spot, though that we can make up the most ground is on Saturdays,” he said.
This past Saturday saw 64,000 head harvested, one of the largest if not the largest non-holiday Saturday slaughter in years, he said.
Forecasting harvest needs for the rest of the year, the industry will need to harvest roughly 518,000 head a week. With the Saturday harvest last week, the weekly slaughter was at 519,000 head, he said.
That’s right where CattleFax thinks the industry needs to be for the remainder of the year. But there are challenges ahead, he said.
The industry should expect more fed cattle to move to the Pacific Northwest and Alberta, Canada, where there’s excess space for harvesting. It should also expect fewer cattle coming in from Canada and shouldn’t rule out some Sunday slaughter, he said.
Tyson plans to rebuild the Holcomb plant but hasn’t announced a timeframe.