Kansas Livestock Association CEO Matt Teagarden joined the HPJ Talk podcast Aug. 15 to discuss the aftermath of the fire at the Tyson Fresh Meats facility near Holcomb, Kansas, Aug. 9.
The first two days of trading after the fire saw cattle markets dip, which was something that KLA and the National Cattlemen’s Beef Association were concerning to cattlemen and KLA members, but Teagarden explained that it’s a matter of supply and demand.
“We have 30,000 head of cattle that were supposed to go to Holcomb this week that can’t and the market is trying to sort out how many can be harvested at other plants,” Teagarden said. “We don’t have excess capacity. So, the supply of fed cattle went up compared to the amount of processing capacity. Simple supply and demand economics would tell you that the market might determine that the price should decline because of that, but by how much? The market will sort that out.”
Monday and Tuesday, Aug. 12 and 13, saw some pretty strong declines in the market, but by Wednesday and Thursday, Aug. 14 and 15, Teagarden said the market was coming to grips with the impact of the temporary loss of the Holcomb plant.
That lower price felt by cattlemen, is an incentive to other packers, though, to figure out ways to increase their own capacity in their plants and add additional shifts on weekends so that the cattle supply doesn’t get backed up in the feedlots.
“That just exacerbates the problem,” Teagarden said. “They add more pounds and that means more supply coming onto the market and just compounds the problems when we start to delay marketing.” Every extra day that fat cattle spend in the yards means more feed costs and a decline in efficiencies for the feedyard, he added.
“Of course we don’t like seeing the cattle market go down and if the beef market goes up at the same time, that just puts salt in the wound,” Teagarden said. But that incentive for packers is what could raise packing capacity to get through this short time.
Teagarden said that right now Tyson has indicated that it will move cattle to its other plants, likely in Amarillo, Texas, or Lexington, Nebraska, which are the closest to Holcomb. But still, that will mean team members may have to move, and labor is already really tight in the High Plains area, so those additional shifts may be difficult to fill.
That also means those plants and added shifts will need U.S. Department of Agriculture inspectors and graders, which KLA and NCBA has formally requested flexibility in respect to inspectors and graders during this brief period.
“We have to have inspectors in those plants, graders in those plants, before shifts can start,” he explained. So far, there’s been a positive response from USDA, he added.
The immediate market response, with the cutout value going up significantly the first couple of days following the fire was concerning, Teagarden said. But if the cattle movement can’t be sorted out in the coming weeks so that the system is operating smoothly again, consumers might start to feel the pinch at the meat counter.
“Right now we have strong demand from our U.S. consumers, who are paying higher prices for more pounds of products already,” he said. “If that supply is disrupted, that price is likely to go higher. But we want to remain affordable for that consumer.”
The first few days following the fire were full of uncertainty, Teagarden said, but he’s overall hopeful that Tyson can make its repairs and get back online quickly.
“We saw the move down that the market took, and that’s real dollars,” he said. “That’s important for our members and all cattle producers.” The key to fixing this, he said, is figuring out how to get cattle supply moving through the chain again, and when that happens, cattlemen, packers and consumers will all benefit.
Jennifer M. Latzke and Kylene Scott can be reached at 1-800-452-7171. To listen to HPJ Talk, visit www.hpj.com/podcasts/.