AUSTIN, Texas (RFD News) — Tyson Foods is restructuring its beef operations, closing one facility with another scheduled to close and a third potentially being sold.
Dr. Derrell Peel said there is currently more processing capacity than the cattle supply can support.
“At this point in time, obviously, with each adjustment down in capacity, we’re moving closer to kind of reestablishing a balance between capacity and the very limited cattle supplies we have right now. I don’t think probably, particularly with Tyson’s indication that they may restart the second shift in Amarillo, that the total capacity wouldn’t change that much. We probably still have excess capacity for the foreseeable future. That’ll continue to be a challenge for packers. That may be the basis for some additional adjustments going forward.”
One of the closures is in Joslin, Illinois, impacting 2,500 workers. Peel said the effects extend beyond the facility, with cattle producers also caught in the middle.
“Those cattle are going to have to go to a different location. For a lot of producers that have utilized this plant, there will be some additional transportation costs associated with those cattle, depending on exactly where they’re located. More than likely, the majority of these cattle, I would imagine, will transfer to the Dakota City, Nebraska plant. It’s the closest plant, but it may depend on other factors relative to Tyson’s operations and how they’re going to move things around a little bit.”
While the Tyson news caught many by surprise, Brady Miller with the Texas Cattle Feeders Association said the announcement was somewhat expected and was just a matter of time.
“If you look at the overall industry and where we are with the cattle cycle and with the southern border being closed and about 1.5 million fewer Mexican cattle coming across, and the weights, you look at the added weights that we’ve been adding to these cattle over the last couple of years, handful of years, we knew there was going to be excess capacity and we knew there were probably going to be some more closures that were going to occur.”
Despite the negative news, Miller said the industry remains in a good position.
“Even though negative news is going to lead the headlines, the current state in the industry is, I’m going to tell you, is still in a really good place. The reason I say that is because whenever I look at consumer and are the consumers still buying our high quality beef, are we still exporting animals, you know, on a good pace, that’s what I look at whenever I look at the overall overview of the industry.”
Tyson’s restructuring follows growing financial pressure. The company expects its beef segment to lose $500 million to $650 million this fiscal year after cattle costs surged and quarterly beef volumes fell nearly 16%.
