Several months ago in this space, I compared excess slaughter capacity in the beef industry to a dangerous game of musical chairs. Given the announcement just made by National Beef, it would appear that the frantic music continues to intensify as another chair gets pulled from the ring.
National Beef Packing Company plans to close its processing facility located in Brawley, Calif. The last day of production is expected to be April 4, 2014. Approximately 1,300 employees working at the facility will be impacted by this closure.
The Brawley plant currently kills close to 2,000 cattle per day, a practical capacity that has been increasingly difficult to fully utilize over the last decade as the national herd size steadily circles the drain.
Indeed, it seems this plug-pulling announcement is particularly ominous coming on the same day as the annual cattle inventory, the national head count due out Friday afternoon that will no doubt confirm few more than 87.6 million cattle as of January 1, nearly 1.7 million head smaller than last year, 9 million under 2007, and the smallest since 1951.
The more cattle numbers trend lower, the more excess infrastructure (e.g., kill capacity, feedlot pen space, sale barns) become economically untenable.
Brawley is the newest example of necessary downsizing within the industry. Just a year ago, we were similarly traumatized by Cargill's plant closing in Plainview, Texas.
After beef producers finish a sober reading of today's new cattle census, my guess is that few will be willing to bet that this sad casualty list has necessarily maxed out.
Form more from John go to www.feelofthemarket.com
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