The Shock Head Around Nebraska

Tyson Foods’ announcement that it is closing the beef processing facility in Lexington sent shockwaves through the Lexington community, Nebraska’s cattle sector, and the country. The facility processed around 5,000 head of cattle a day and employed over 3,000 workers. Tyson also said shift changes were going to be made at its Amarillo facility, although it will remain open. Tyson also has processing facilities in Dakota City and Madison.  

The closing of a beef processing plant isn’t a surprise. Market observers have warned of plant closings. The beef cow inventory is at its lowest since 1965 and cattle prices are at record highs. Plus, new facilities have come online, meaning more capacity is chasing fewer animals. As a result, processors are bleeding red ink. Tyson reported an adjusted operating loss for its beef business for the last fiscal year of $426 million. It expects to lose around $500 million in fiscal year 2026. The closing of a large-scale facility like the one in Lexington is a surprise. Presumably, economies of scale and operating efficiencies would enable it to withstand current market conditions compared to other facilities. The closing might offer insights into Tyson’s thinking regarding the time it will take to rebuild the beef herd.

Glen Tonser, an economist with Kansas State, says the closing could have an “adverse 6.5% impact on feed cattle prices” based on past research he and Lee Schulz of Iowa State conducted to estimate the impact of changes in packing sector capacity utilization on prices. The past few months have seen a string of unexpected policy announcements and political posturing affect cattle prices. The Tyson announcement is just the latest. However, it stands to have the greatest implications for Nebraska.

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