Tyson Beef Plant Fire Leaves Huge Void in Processing Capacity

Live cattle prices dropped $3 per cwt on Monday following news that a Kansas beef processing plant was severely damaged by fire.

The Tyson plant near Holcomb, Kansas, which is in the heart of cattle feedlot territory, processed about 6,000 head of fed cattle per day (30,000 head in a five-day work week), which amounts to 6% of total U.S. fed cattle capacity, according to the Kansas Livestock Association. The rest of the industry will need to absorb that total, the KLA reports.

• READ MORE: CATTLE FUTURES PLUNGE AFTER FIRE SHUTTERS TYSON PLANT

A news release from KLA cites analysis from CattleFax in that shifting the supply to other beef plants in Texas, Kansas, 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."

The August 9 fire severely damaged the plant, which employs 3,000 workers. In a news release dated August 12, Tyson Foods said it will rebuild on the Holcomb site. Until the plant comes back online, full-time workers will receive full pay, the company said.

• READ MORE: TYSON FOODS PLANS TO REBUILD KANSAS PACKING PLANT

"This is a difficult time for our team members and their families, and we want to ensure they're taken care of," said Steve Stouffer, group president of Tyson Fresh Meats, who added that the team members may be called on to work during this time to help with cleanup and other projects, but regardless of the hours worked, all full-time active employees are guaranteed pay.

"We're taking steps to move production to alternative sites," Stouffer said. "Tyson Foods has built in some redundancy to handle situations like these and we will use other plants within our network to help keep our supply chain full."

The cause of the fire is unknown.

The plant was opened in 1980 by IBP, Inc., which was acquired by Tyson Foods in 2001.