Cargill Inc. said Wednesday that it will permanently close a Milwaukee beef processing facility employing 600 people because of the tight U.S. cattle supply.
It is the latest sign of shrinkage in the beef industry, which has seen operations close or go idle in Texas, South St. Paul and elsewhere after drought reduced U.S. beef and dairy herds to record lows.
Cargill spokesman Mike Martin said the plant will shut down Friday, but workers will be given 60 additional days of pay. They also will be able to apply for jobs at other Cargill plants, but Martin said the openings won’t be enough to absorb the entire workforce.
A ground-beef plant employing 200 workers at the site will remain open, he said.
Cargill is headquartered in Minnetonka, while its beef unit is based in Wichita, Kan.
Derrell Peel, a livestock marketing specialist at Oklahoma State University, said the U.S. cattle herd dropped to 89 million in 2013 — the lowest since 1951 — after three years of drought that caused cattle ranchers to sell off stock. Even before the drought, cattle numbers had been going down, creating overcapacity in the beef processing industry, he said.
Cargill idled its Plainview, Texas, beef processing facility in February 2013, laying off 2,000 workers. The company has six other beef processing plants, in California, Texas, Kansas, Colorado, Nebraska and Pennsylvania.
Peel said he expects more plant closings in the meat industry. “It is a test of these companies to see who has the deepest pockets to withstand the rough times and be one of the survivors,” he said.
Mike Miller, senior vice president for global marketing and research for the National Cattlemen’s Beef Association, said cattle operators are looking to expand as drought has receded and corn prices have dropped. More cattle are being retained by producers to breed, resulting in fewer being offered for immediate sale in the production system, he said.
“That is the phenomena going on right now,” he said.
Cargill said it purchased the Milwaukee beef harvest plant in 2001. It has a processing capacity of 1,300 to 1,400 animals daily.
“Closing our Milwaukee beef plant is taking place only after we conducted an 18-month-long analysis of the region’s cattle supply and examined all other possible options,” John Keating, president of Cargill Beef, said in a statement. “It is unfortunate that we must close any beef plant because of the impact to good people, their families and the community. The harsh reality is that the U.S. beef cattle herd is at its lowest level since 1951, with any significant herd expansion being years away.”