Tyson Foods’ decision to close a beef plant that employs about one-third of Lexington, Nebraska’s residents could devastate the small town and hurt the profits of ranchers across the country.
Closing a single slaughterhouse may not seem significant, but the Lexington plant employs about 3,200 people in a town of 11,000 and has the capacity to slaughter about 5,000 head of cattle a day. Tyson also plans to cut one of two shifts at a plant in Amarillo, Texas, and eliminate 1,700 jobs there. Together, these two moves will reduce beef processing capacity nationwide by 7-9%.
Consumers may not see much change in prices at the grocery store over the next six months because all the cattle now being prepared for slaughter will be processed, possibly just at a different plant. But in the long run, beef prices could continue to rise beyond current record highs — due to factors ranging from drought to revenues — unless U.S. ranchers decide to raise more cattle, which they have little incentive to do.
A surge in beef imports from Brazil, such as that encouraged by President Donald Trump last week by slashing tariffs on the South American country, could help insulate consumers while ranchers and feedlots struggle with high prices and falling prices.
Here’s what we know about plant closures and the impact of changing rates:
A ‘gut punch’ for the community
Clay Patton, vice president of the Lexington Area Chamber of Commerce, said Monday that Tyson’s Friday felt like a “gut cartoon” for the community in the Platte River Valley, which serves as a key link in the agricultural production chain.
When it opened in 1990, the Lexington plant that was later revived by Tyson revitalized the formerly declining city by attracting thousands of immigrants to work there and nearly doubling the population.
When the plant closes in January, ripple effects will be felt throughout the community, hurting many first-generation business owners and investments in new housing, Patton said. Tyson said it would offer Lexington workers the opportunity to relocate to take open jobs at one of its other plants if they agreed to uproot their families for jobs hundreds of miles away.
“I hope we can come through it and we’ll really come out better on the other side of it,” Payton said.
Elmer Armijo was confronted with just how established the community was when he moved to Lexington last summer to lead First United Methodist Church. They described solid job security, good schools and health care systems, and urban growth — all of which are now in doubt.
“People are totally freaked out,” Armijo said. “Economy in Lexington Lives in Tyson.”
Many local churches, including Armijo’s, already offer counseling, food pantries and gas vouchers for community members.
Cattle prices are falling in response
The prospect of losing a major buyer for the cattle and increased imports from Brazil, which already accounted for 24 percent of the country’s beef imports this year, only add to doubts about how profitable the U.S. cattle business can be in the next several years, making it less likely that U.S. runners will commit to raising more animals.
“There’s just a lack of confidence in the industry right now. And producers aren’t willing to invest to rebuild,” said Bill Bullard, president of United Stockgro, a ranchers-cattleman action legal fund of America.
Increasing imports from Brazil has the potential to affect the market — more so than Trump’s suggestion to increase imports from Argentina — since the country sends more beef to the U.S. than any other. But for steak lovers, the cut’s sky-high price is unlikely to impress regardless, as most imports are lean cuts that are mixed with ground beef.
It’s hard to predict whether imports will continue to account for about 20 percent of the U.S. beef supply next year, said Glen Tonser, an agricultural economist at Kansas State University. He pointed out that Trump’s rates have changed several times since his announcement in the spring and could quickly change again.
The only constant in the equation has been that consumers have continued to buy beef despite rising prices. Tonser said the average American will consume 59 pounds (27 kilograms) of beef this year.
Tyson continues to suffer losses in the beef business
The meat business across the country has long had overcapacity, meaning the country’s slaughterhouses can handle more cattle than they can process. This has only been made worse in recent years as the government has encouraged more small companies to open slaughterhouses to compete with Tyson and other giants that dominate the beef business.
After already reporting $720 million in red ink in beef over the past two years, Tyson expects a loss of more than $600 million on beef production this year.
Tuncer said it was inevitable that at least one beef plant would close. After that, Tyson’s remaining plants will be able to operate more efficiently near full capacity.
Ernie Goss, an economist at Creighton University in Omaha, said the Lexington plant may not be scaling up in an industry that increasingly relies on technological advances that increase productivity.
“It’s very difficult to adapt or renovate an old plant to the new world,” Goss said. The Lexington facility “was not yet competitive in today’s environment in terms of output per worker.”
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