Iowa packing house closes
September 14, 2015
Short supplies of finished cattle caused the closure of a 60-year-old processing plant earlier this month, according to meat packing company Tyson Fresh Meats, a subsidiary of Tyson Foods, Inc.
The cattle market in Dunlap, Iowa, was down slightly this week but it was likely due to the overall market softening and not Tyson Foods' announcement that a local beef processing plant was closing, said Dunlap Livestock Auction co-owner Jay Schaben.
Tyson reported Aug. 14 that the plant would no longer be in operation. The around 400 employees were given the opportunity to apply for jobs at other Tyson-owned plants, the company's news release said.
"The cattle supply is tight and there's an excess of beef production capacity in the region," Steve Stouffer, the company's president, said in the release. "We believe the move to cease beef operations at Denison will put the rest of our beef business in a better position for future success."
“It’s a national thing, the cattle numbers being down. But they are going to change.” Jay Schaben, Dunlap Livestock Auction co-owner
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Schaben, whose auction barn is 16 miles from Denison, supported Tyson's assertion that available cattle are lacking in the area.
"I would agree that there is a shortage of ready cattle," he said, adding that there were likely other reasons contributing to the plant closure such as outdated equipment.
"It's a national thing, the cattle numbers being down. But they are going to change. There are cattle that are now being put into production – heifers being bred." Schaben admitted, though, that in his region, government regulations on water and waste management have cut cattle numbers, and he doesn't expect a reversal, locally, of the downward trend. About 250-450 fat cattle go through his barn on a weekly basis.
Sterling Marketing's market analyst John Nalivka said year to date, on a national level, cattle numbers are down six percent and that the Tyson plant represented about two percent of the total cattle processed nationwide.
Denison Livestock co-owner J.R. Pauley doesn't believe the plant's closure will harm local feeders.
"They didn't abandon producers, they became more efficient. The worst deal is that some of the people who used to haul cattle 40 miles now have to haul them 100 miles." Another Tyson plant, located in Dakota City, Nebraska, about 80 miles from Denison, is expected to pick up the slack from the Denison plant.
In the short term, neither Schaben nor Nalivka expects the plant closure to affect the cattle market on a wide scale, but several plants have closed their doors recently and between them, about eight percent of the nation's processing capacity is gone, said Nalivka. "Reduced capacity plus increased supply equals lower prices," he added.
Domestic cattle supplies will not exceed packing capacity anytime in the foreseeable future, Nalivka said, but he expects that by the first half of 2017, the utilization level of packing houses will be around 90 percent or a little more. Currently he said utilization is about 84-86 percent, which he said is not economical.
While several years ago, he probably could have named 100 people from his community who worked in the plant, Schaben said he can't think of any acquaintances who were working there at the time of the closure.
Tyson announced in 2012 it could close the Denison plant as soon as they completed a $90 million expansion and update.
The historic plant was the birthplace of Iowa Beef Packers when it opened in 1961. Springdale, Arkansas-based Tyson Foods purchased IBP in October 2001 for $3.2 billion. This merger ended in the world's largest chicken, beef and pork processor and marketer and the second-biggest food production company in the country. IBP had also built the original plant at Dakota City.
Tyson Meats' spokesman Gary Mickelson did not return a phone call.