My View From The Country

Cargill Closure Announcement - How Much Can The Industry Afford?

What does Cargill’s announcement about the closure of its Lockney, TX, feedyard next summer signify?

Cargill announced this week that it plans to close its Lockney, TX, feedyard, located about 45 miles northeast of Lubbock, next summer. News about the closure of the feedyard that employs 45 workers and boasts a 62,000-head capacity isn’t surprising. After all, Cargill announced the closing of its Plainview packing plant, which is nearby, in January of this year.

The closing of the Lockney feedlot isn’t an isolated situation. Estimates are that a total of 2,000 feedlots have shut down this year. The Lockney closing is significant, however, because it is a larger yard, and perhaps is indicative that the industry has now moved beyond the consolidation and concentration phase, and has begun to significantly reduce capacity.

The announcement of the Lockney closure mentioned persistent drought in the area as one reason for the closure. However, it’s probably more related to the long-term trend in falling cattle numbers, as well as the continuing disadvantages regarding water and feed basis of the Southern Plains feeding industry relative to their Northern Plains counterparts.

While it’s true that a lot of this idled capacity could be returned to production if and when conditions change, the consensus seems to be that the overwhelming majority of the infrastructure being retired won’t come back. It’s true that there’s a lot of talk about herd expansion, falling feed prices, new cattle price highs, and vastly improved moisture conditions in many areas. However, the bigger questions are just how much and when expansion will occur, and how much of the industry’s shrinking size is due to short-term conditions like drought, and how much is due to long-term structural changes like ethanol subsidies.

 

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There are questions on the demand front as well. Will we be able to rebuild and regain domestic market share, or will we continue to move off the center of the plate toward becoming a specialty diet item? Will our export levels increase, thus allowing for industry expansion, if domestic demand doesn’t improve sufficiently to support industry growth?

Finally, it comes down to timing. If we are going to expand, can we do it rapidly enough to avoid losing too much infrastructure? The loss of a critical mass of infrastructure would be a hindrance to rebuilding market share.

 

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Discuss this Blog Entry 5

Anonymous (not verified)
on Oct 18, 2013

What are the ethanol subsidies? I thought the only one was the blenders credit and it was eliminated about a year and half ago?

Frank Schlichting (not verified)
on Oct 18, 2013

When Americans put up trade barriers such as MCOOL to exclude Canadian and Mexican cattle they should hardly be surprised that they are shutting down feedlots and packing plants. Lucky for Canadian producers they have just signed a free trade agreement with the European Union so we have other markets for our cattle

on Oct 18, 2013

The subsidy for ethanol is the government mandated law that forces you to buy one gallon of ethanol for every 9 gallons of gas you buy. Imagine if you where forced to buy tofu every time you bought eggs or meat, the tofu makers would be smiling.

leegren (not verified)
on Oct 18, 2013

Just as we are expanding the cows, the feedlots and packing plants are closing. This should worry everyone involved as expansion may not work with fewer places to send calves and packer cows/bulls.

Steve JK West (not verified)
on Oct 18, 2013

2,000 Feedlot, this sound unbelievable ?
How, many feedlot was there ? that a true feedlot of size? say 5,000 plus head aday

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What's My View From The Country?

As a fulltime rancher, opinion contribur Troy Marshall brings a unique perspective on how consumer and political trends affect livestock production.

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Troy Marshall

Troy Marshall is a multi-generational rancher who grew up in Wheatland, WY, and obtained an Equine Science/Animal Science degree from Colorado State University where he competed on both the livestock...

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