A fire at a major U.S. beef processing plant earlier this month is upending American livestock markets, slamming cattle prices while benefiting meatpacking companies.
The Tyson Foods Inc. plant in Holcomb, Kansas, had the capacity to slaughter 6,000 head a day of cattle — or about 5% of U.S. beef production capacity — before it was destroyed on Aug. 9. The facility’s shutdown has created a livestock glut, dragging down futures to the lowest in almost three years. That’s giving meatpackers such Cargill Inc., JBS SA and Marfrig Global Foods SA access to cheap supply just as demand from retail shops booms.
With the Labor Day holiday — one of the most-popular days in the U.S. for grilling beef — coming up on Sept. 2, retailers are engaging in bidding wars to secure packaged meat for store promotions they’ve already committed to. Even Tyson Foods could benefit, with bigger profits at other plants offsetting losses from the fire.
Beef-packer margins rose to $378.25 per animal on Monday, an all-time high in HedgersEdge data. That’s more than double the levels reported just a week ago. Wholesale prices surged to $2.3869 a pound Friday, the highest in two years. Meanwhile, cattle prices on cash markets crashed to $1.0865 a pound on Friday, the lowest for this time of year in nearly a decade.
“These guys are making more money than they ever have,” said Gary Morrison, vice president at commodity researcher Urner Barry, referring to meatpackers. “The retailers got really scared, and they were out there bidding whatever they could.”
Consumers may not see an immediate increase in steak and burger prices at grocery stores because advertisements and promotions are usually planned six weeks out, according to Morrison.
But higher prices are in the offing, he said, adding that it could take three to six months to rebuild the Tyson plant. If the weather is favorable to grilling on Labor Day, retailers might have to replenish supplies “at a good clip,” meaning higher prices could arrive after the holiday.
Beef prices were already set to gain due to African swine fever spreading in China and decimating its hog herd, given it will be used to substitute for missing pork along with chicken.
Was this article valuable?
Here are more articles you may enjoy.