CHICAGO, Oct 17 (Reuters) - U.S. agribusiness conglomerate Cargill Inc said it will close its Lockney, Texas, feedlot next summer due to shrinking supplies of cattle and high feed costs.
The pending closure comes months after the company shut one of its Texas beef packing plants also because of fewer cattle.
“Due to the drought-depleted beef cattle supply in the region, and after a careful examination of the region’s overall beef production situation, Cargill determined that it could no longer justify the operation of its Lockney, Texas, feedlot,” Cargill spokesman Mike Martin said on Thursday.
The feedlot will be closed “at a date to be determined in summer 2014,” he said.
The feedlot, with a one-time capacity of 62,000 head, or 120,000 cattle annually, is one of three Cargill feedlots in Texas. The other two are in Dalhart and Bovina.
The closure marks the second Cargill property in Texas to shut down recently. Cargill, the third largest U.S. meatpacker, idled its Plainview beef processing plant in February for the same reasons. The Lockney feedlot primarily supplied cattle to the shuttered Plainview plant located 15 miles away.
“Those cattle had to be hauled to the other Cargill plants that were further away. The closure of the kill plant at Plainview was a major contributing factor to increased freight cost to ship cattle,” said John Ginzel, an analyst with The Linn Group based in Chicago.
Cargill said it will continue to supply its Friona, Texas, beef processing facility with cattle from its two remaining Texas Panhandle feedlots as well as from other feedlots in the region.
“No additional Cargill beef facility closures are planned,” Martin said.
The U.S. cattle supply is the smallest in 61 years as livestock producers in the southern Plains have faced years of drought. Record-high feed prices over the past year contributed to the challenges of feeding cattle.
Most of Cargill’s business units were profitable in 2012 but earnings at its animal protein business were down, pressured by poor profit margins in its beef sector, the company said.
Ginzel said the loss of the Cargill’s Lockney feedlot likely will not affect how packers in the region compete for cattle.
Cargill has 45 employees at the feedlot and they will be offered positions at other company facilities in the region.