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RAMIFICATIONS OF TYSON'S BEEF PROCESSING PLANT FIRE, PROCESSES 5% OF NATION'S SUPPLY
Aug. 15, 2019
Source: Oklahoma Farm Radio Network
Fire struck the Tyson Food's Holcomb, Kan. beef packing plant at the end of this last week. The cattle market quickly responded Monday with limit losses locking down both the live and fed cattle complexes. As of Tuesday morning, August live cattle were still trading -$4.50 at $100.55 while August feeder cattle had recovered slightly from yesterday, down just $3.05 at $131.35.
In an interview with me, Oklahoma State University Extension Livestock Market Economist Dr. Derrell Peel explained that it will likely take some time for the market to sort out the ramifications of this fire.
"Obviously, there will be some fairly pronounced initial reactions. Some of that just stems from the uncertainty of knowing where we are and how long this might last and exactly what the path back from this will be," Peel said, remarking on the significance of losing up to 5% of the industry's slaughter capacity and the disruptions that will cause in the supply chain. "So, there will certainly be impacts for specific farms and accounts and clients - but perhaps maybe more generally in the boxed-beef market."
On the other side of things, Peel says fed cattle are coming in on a regular basis. While other packers may try to take advantage of the situation and make up for the resulting slack this fire has caused, Peel worries that there really is not much flexibility in their production schedules to do so.
He muses that if cattle are delayed for a while, the worst-case scenario would be that for at a period of time, those cattle would add more weight and potentially impact supplies. The more pressing question at this point, however, is what the nature of this situation actually is - short or extended? Some early comments by Tyson suggest that the plant could be reopened fairly quickly.
Source: Although some speculation has circulated that it may be time to build a whole new plant all together as some believed the industry was approaching its full slaughter capacity even before the fire.
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