Supply of cattle hits 75 year low

The Guardian - Tyson Foods, the largest meatpacking company in the US, announced last week that it is closing two of its facilities in Iowa and Utah and selling a beef facility in Washington state, and will lay off hundreds of workers as the supply of cattle hits a 75-year low.

The historic cattle shortage has been driven by a multi-year drought, rising costs and severe economic pressures, including consolidation among cattle ranchers. Beef prices have soared over the last year due to the shortage, though economists said the Tyson plant closures likely won’t hit consumer prices so hard.

Earlier this month, Tyson reported in its third-quarter earnings that beef volume is down 15.9% and beef operating loss is at $138m.

Glynn Tonsor, an agricultural economist at Kansas State University, said the US has had excess capacity for processing and packaging beef for several years now, and beef that would have been processed in Tyson’s Iowa and Utah plants will just be rerouted.

“For the majority of the last 40 years, nationally, the US has had more capacity to harvest cattle than we’ve had cattle,” he said. “Anytime you have too much capacity, or ‘too much’ supply relative to what is needed in the market, that puts downward pressure on the margins in that sector. That’s not new.”

With not enough cattle to harvest, meatpacking plants have been taking measures to slow down operations, including reducing shifts or cutting Saturday workdays. If operations don’t pick up, plants eventually close.