By STAN MADDUX
Indiana Correspondent NASHVILLE, Tenn. — Plummeting livestock markets as far away as Indiana, Kentucky, and Tennessee are recovering from an August 9 fire that destroyed a Tyson beef processing operation in Kansas. In the meantime, higher beef prices following the blaze have drawn scrutiny not just from livestock producers but USDA Secretary Sonny Perdue. He announced last week he was directing the agency’s Packers and Stockyards Division to launch an investigation into recent beef pricing margins, to determine if there is any evidence of price manipulation, collusion, restrictions of competition, or other unfair practices. “If any unfair practices are detected, we will take quick enforcement action,” Perdue said. Jim Akers, chief operating officer at Bluegrass Stockyards based in Lexington, Ky., and Andrew Griffith, a livestock economist for the University of Tennessee-Nashville, said the market – especially for feeder cattle – has improved noticeably since the fire. They said the impact on producers from a wide area of the nation had a lot to do with capacity at the plant being extremely high and typical panic in markets surprised by uncertainty. The downturn is leveling off since producers adjusted to the sudden loss of demand, from a facility that weekly processed 30,000 or more head of cattle – or 5 percent of what’s slaughtered nationwide. The loss of volume was significant enough to affect livestock markets in parts of the Midwest and Southeast. “The biggest waves were centered around Kansas, and it had that ripple effect, so the impact got smaller and smaller the farther away you got, but there was still an impact,” Griffith explained. Feed cattle operators selling to suppliers of other slaughtering houses with capacity available to ramp up processing and packaging of beef helped reduce the backlog. In fact, there were 651,000 head of federally inspected slaughtered cattle the week after the fire, or about 9,000 more than the week of the fire, according to the USDA. “This week, we see feeder cattle prices almost jump back to where they were prior to the news of the fire,” Griffith said last week. He said finished cattle prices in the cash and futures market haven’t recovered as much, but were creeping back as of last week. “We’re not completely back to where we were, but its close enough.” He said livestock processors with room to increase capacity had good financial reason to do so because the fire made supermarkets and other retailers nervous, and willing to pay more to maintain supplies especially for Labor Day weekend. Finished cattle suppliers, in particular, were also willing to sell to processors at a lower price to eliminate inventories, he noted. “That was a win-win for the slaughter companies, the packaging facilities, because everything was in their favor,” Griffith added. After the fire, trading for packaged beef went up from about $217 to $239 per cwt. He said the price for processed beef has moderated and should begin coming down to where it was prior to the fire, after Labor Day. Tyson has announced plans to rebuild its plant but gave no time frame for completion. Akers said his feed cattle operation was helped through the downturn by selling to finishers in areas less impacted by the blaze. “We send cattle all across the country, so we’re not totally reliant on one particular spot. I think that more than anything has kind of held the market together here,” he explained. Bluegrass Stockyards sells about a half-million calves and yearlings annually from seven locations in Kentucky. Akers said it was also easier for cattle feeders to rebound because their cost of reaching more distant customers less affected by the blaze is lower than finishers whose only resort might be to accept whatever is offered by the nearest processor. He said after a competitor is taken out of production, processors have more leverage in price negotiations, with the number of plants nationwide being limited. “They’re making a pile of money right now. Their margins are through the roof,” Akers added. |
