Spencer, IA: (Mar. 17, 2014) – Cattle producers hailed Tyson Foods’ decision to keep open its Denison beef-processing plant, but analysts question whether Tyson will be able to stick by its decision.
In 2010, Tyson said it was considering closing the 50 year old plant because of decreasing cattle supplies in the area. But the company, last week, said market conditions have changed and the company has no immediate plans to close the plant.
Iowa State University Ag Economist Lee Schulz says other U.S. beef plants have closed, helping to reduce industry over-capacity. He says that should help plants still operating. And Schulz noted that strong beef demand, coupled with the smallest beef herd in sixty years, has pushed beef prices to record highs. Schulz says, “That definitely helps throughout the supply chain, packers included.”
Additionally, Schulz notes that cattle production is moving north, and that makes Denison a more strategic location.
Still, economists are concerned. Allendale’s Rich Nelson says beef packers won’t see profitability until 2016, possibly 2018. He says that will force more consolidation within the industry.
Cargill closed a meatpacking plant in Texas a year ago. National Beef is slated to close a California plant next month. Nelson says he expects one large meatpacking plant to close this year and another in 2015. Nelson adds he wouldn’t be surprised if one of those plants is in Denison.