(Adds background, company spokesman, analysts comments)
By Theopolis Waters
CHICAGO, July 30 (Reuters) - Cargill Inc, one of the nation’s largest beef processors, said on Wednesday it plans to close its Milwaukee, Wisconsin, beef-processing plant on Friday, because the size of the U.S. herd has fallen to its smallest in 63 years.
The ground beef production side of the plant, which employs about 200 people, will remain open, the company said.
Early last year, Cargill year shuttered its Plainview, Texas, beef plant, which processed about 4,500 head per day, because of the scarcity of cattle and overcapacity in beef processing in the Texas Panhandle.
Fewer cattle are available after several years of drought have hurt crops, forcing ranchers to trim their herds.
“Closing our Milwaukee beef plant is taking place only after we conducted an 18-month-long analysis of the region’s cattle supply and examined all other possible options,” said John Keating, president of Cargill Beef, based in Wichita, Kansas.
“The harsh reality is that the U.S. beef cattle herd is at its lowest level since 1951, with any significant herd expansion being years away,” he said.
The Milwaukee facility has an estimated daily slaughter capacity of 1,300 to 1,400 cattle, consisting primarily of cows.
Closing the plant would represent roughly 6 percent of the total U.S. annual cow slaughter capacity of about 7.1 million head, said John Nalivka, president of Sterling Marketing Inc of Vale, Oregon.
Cows that would be sent to the Milwaukee plant will likely be absorbed by some of Cargill’s nearby competitors, he said.
Cargill’s 600 employees affected by the shutdown will be offered positions at other company locations in the region.
There are no plans to reopen the plant, Cargill spokesman Mike Martin told Reuters via e-mail.
“The challenge is that there are so few animals, not that there are surplus animals that will be available to others. There may a small volume of animals that others benefit from Cargill not processing,” said Martin.
The company operates six other U.S. beef processing plants in California, Texas, Kansas, Colorado, Nebraska and Pennsylvania.
“If they were only killing cows, the impact on the larger cattle and beef markets would probably be pretty low,” said Missouri-based Doane Advisory Services economist Dan Vaught. By the same token, the closure could be mildly bearish for cow prices in the area, he said. (Reporting by Theopolis Waters; Editing by Dan Grebler)