Fed cattle
processing capacity will be strained to handle record available supplies after
a fire August 9 closed the Tyson beef plant at Holcomb. The plant operated at
about 6,000 head of fed cattle per day, leaving a shortfall in the national
packing capacity of 30,000 head for a five-day work week. According to
CattleFax, that amounts to 6% of total U.S. fed cattle packing capacity the
rest of the processing industry will need to absorb. The plant represents 23.5%
of Kansas fed cattle packing capacity.
A Tyson news release stated the company plans to rebuild the plant at the same location. Officials are assessing the damage, making it difficult to establish a timeline, but work to clear the damage already has begun.
Based on CattleFax analysis, shifting the supply to other plants in Kansas, Texas, Colorado, Nebraska and Iowa will mean capacity in those regions needs to run 8% to 8.5% higher. The market analysis service reports this will be difficult to make up based on current packing industry infrastructure.
CattleFax suggests the significance of this event is amplified by the growing supply of finished cattle both nationwide and in Kansas. The U.S. cattle on feed total in feedyards with 1,000 or more head capacity was record large at 11.5 million head July 1. Cattle on feed in Kansas as of July 1 stood at 2.4 million head, which was also a record and represented about 21% of U.S. total.
Potential market impacts predicted by CattleFax include a possible loss of currentness in the cattle feeding segment, cattle feeders could lose some market leverage and all classes of cattle could see more price risk. Some of the pressure could be alleviated if existing harvest capacity dedicated to cows and bulls is incentivized to process fed cattle and if plants have the cooler, boxed beef capacity and labor to process cattle on weekends.
KLA has been in contact with Tyson and Gov. Laura Kelly’s administration regarding the situation. This communication will continue as KLA works with both sides to address any obstacles standing in the way of bringing the facility back on-line as quickly as possible. Gov. Kelly has expressed the state’s full support to Tyson President and Chief Executive Officer Noel White.
Over the weekend, KLA asked NCBA to make the Commodity Futures Trading Commission aware of the situation. NCBA made contact with the regulatory agency and contacted the office of U.S. Ag Secretary Sonny Perdue to apprise USDA of the plant fire.