REDFIELD, Iowa (DTN) -- The upcoming closure of the Tyson beef packing plant in Lexington, Nebraska, will have an immediate effect on the city, but also a longer-term effect on the cattle industry in the region and beyond.

"We've always known there was a potential for shutdown with the smaller cattle supply," said Cozad, Nebraska, cattleman Craig Uden during a webinar hosted by the University of Nebraska-Lincoln. Uden, the president-elect of Nebraska Cattlemen and past president of National Cattlemen's Beef Association, is part owner of Darr Feedlot, which is just 20 minutes from Lexington.

They have sent cattle to this plant since it began operation in 1990. He said the biggest challenge he and other cattle feeders in the region will face is the added cost of transportation to get cattle to other packing plants for processing. This will mean Uden has to make up for that cost through selling these cattle to packing plants with a more focused market on a grid for quality and yield. He also hopes to work with many of the other large regional and national packers to fill their needs.

CLOSURE, CUTBACK AFFECTS CAPACITY

Elliott Dennis, livestock and meat economist for the University of Nebraska-Lincoln Center for Agricultural Profitability said the closure of the Lexington, Nebraska, plant as well as the reduction to one shift at Tyson's Amarillo, Texas, plant will reduce processing capacity nationwide by 7% to 9%.

Dennis said the capacity reduction by packers is due to the reduction of profits caused by lower cattle numbers. "In 2015 and 2016 packer profits were high. We saw that continue through Covid, but now with few cattle numbers, their profits have decreased," he added. Cattle feeders have learned to raise these animals more efficiently, which has helped increase beef yields. Cattle are getting fed to heavier weights as well, which Dennis said is helping provide more tonnage to the beef supply.

"All the contributing factors mean fewer profits for packers and led to the need for a cut back for plants by these packers," he said. "The closure of the Mexican border has also led to fewer cattle on feed in Texas, which likely contributed to the cut back to one shift at Tyson's Amarillo plant." Dennis said Tyson is still showing they are committed to that region, which is why the plant just cut back due to lower numbers.

While there have been temporary beef plant closures due to fire or during the COVID-19 pandemic, the last permanent closure dates back to Plainview, Texas, in 2013. Other incidents including weather or health events have affected the markets through the years, with some taking longer than others to recover. "The news of the plant closure led to a steady decrease in fed cattle prices. We have seen a slight rebuild in those prices as feedlots are finding ways to redistribute cattle to other plants," Dennis added.

Price risk management will help cattle producers protect their investment. If they rely on selling on the cash market, Dennis said there will be more of an impact.

ASSISTANCE FOR ALL

Uden voiced his concern for smaller farmer-feeders in Nebraska. "These are the ones who will be impacted more because they don't have the numbers to take to a big plant," he said. "We hope we can help them market their cattle and keep them in business."

Laura Field, executive vice president of the Nebraska Cattlemen said the news was surprising and disappointing. "This affects cattlemen all around Nebraska and the surrounding states. This takes 15% of Nebraska's slaughter offline," she said. Nebraska Cattlemen leadership has been in contact with the state and national government officials to discuss the impact on the state and regional cattlemen as well as the local area's impact. The Lexington plant employs 3,200 people in the city with a population of 11,000.

Nebraska Gov. Jim Pillen announced last week a collaboration between several agencies and community organizations to help the families impacted by the upcoming closure. The state departments of Labor, Health and Human Services, Economic Development, and Agriculture are partnering with local Lexington organizations to connect these residents with various assistance programs and support. Resources will be provided for unemployment insurance benefits, job searching and economic support.

Uden added that the 60-day lead time for the closure has helped all involved. "This closure comes at the time of the year where the cattle numbers are typically lower," he said. "However, if we don't see the herd start to rebuild, we may see more plants cutting back or closing to meet the cattle capacity."

See, "Tyson to Close 5,000-Head-a-Day Beef Plant in Nebraska," https://www.dtnpf.com/….

Also see, "Tyson Nebraska Plant Closure, Texas Plant Cutback Create Uncertainty for Cattle Market," https://www.dtnpf.com/….

Jennifer Carrico can be reached at jennifer.carrico@dtn.com

Follow her on social platform X @JennCattleGal

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