| NASHVILLE, Tenn.
NASHVILLE, Tenn. Feb 6 Up to three more U.S.
beef packing plants could close in the next two years as the
industry grapples with surplus packing capacity while ranchers
try to rebuild the country's smallest herd in 63 years, a
leading cattle analyst said on Thursday.
"To go from liquidation to expansion over the next two
years, which we strongly feel we're in the process of doing,
you're going to pull between 2 million and 2-1/2 million cattle
out of the harvest mix by 2015 compared to 2013," Kevin Good, a
senior analyst with closely followed CattleFax, told Reuters on
the sidelines of cattle industry's annual meeting here.
"Given that decline, there is the risk that one to three
packing plants could go in the next 12 to 24 months, depending
on their size," he said.
Good did not specify which plants would likely fail but
warned that cow processing facilities are at greatest risk due
to fewer cows being culled - resulting in a smaller supply for
Beef cow numbers in the United States have declined 16 out
of the past 18 years, according to Good. Since the year 2000,
slaughter or harvest rates for steers and heifers have decreased
about 1 percent per year, he said.
The U.S. beef industry has been struggling in recent years
with high feed costs, coupled with drought and reduced consumer
demand for beef.
As the industry moves through 2014 to 2015, the slaughter
rate for steers and heifers will drop 2 percent to 3 percent as
more heifers are being held back to replenish the herd, said
Good, who projected cow slaughter rates would fall 8 percent to
10 percent a year in 2014 and 2015.
Last Friday, the U.S. Department of Agriculture's annual
cattle inventory report showed the total number of cattle in the
United States as of Jan. 1 at 98 percent of where it was a year
earlier, or 87.730 million head. It was the smallest herd since
1951 and down 2 percent from 89.3 million head a year ago.
Analysts had forecast a 1.4 percent decrease.
In response to Friday's report, analysts said the data
suggests that feed costs remained high in the first half of 2013
as historic drought in 2012 lingered, discouraging producers
from retaining heifers. They believe ranchers held back more
breeding stock as corn and hay costs came down in the second
half of 2013.
Recently, National Beef Packing Co announced the
last day of operation on April 4 for its Brawley, California
beef processing plant. The company cited tight supplies for the
decision to close the facility, which has a slaughter capacity
of about 2,000 head of cattle per day.
California, the nation's top dairy cow and 18th-ranked beef
cow producer, is suffering through historic drought, the remnant
of a prolonged dry spell that shriveled crops and grazing
pasture in the central and southwestern United States.
Scarce supplies and costly feed at the time prompted Cargill
Inc to shutter its Plainview, Texas, beef plant early
last year, with plans to close," feedlot in Lockney, Texas in
the summer of 2014.
Good indicated the expected drop in the number of beef
processing plants would mean a lot more cattle for the
facilities that are left.
"Feedyards and packing segment are both going to have a
pretty tough time in the next year or two as far as just
overcapacity," Good said. "The bright side is, as we look three
to four years down the road, as we start to expand, then at some
point there will be a few more cattle."