Cargill announced Wednesday that it will close its Milwaukee beef plant on Friday, citing a deep, multiyear decline in the number of cattle available for slaughter.
About 600 people will be affected, according to the company. A ground beef plant at the site will stay open and continue to employ another 200 people.
Cargill’s six other U.S. beef plants, including one in Dodge City, are unaffected.
The beef packing industry has developed substantial overcapacity as the nation’s cattle herd has shrunk in recent years. A three-year drought that settled in over some the nation’s biggest beef areas, such as Texas and Kansas, along with high prices for corn and other feed, pushed producers to send more of their herds to slaughter. Cattle plants even enjoyed a surge of production in 2012 as ranchers moved to liquidate their herds.
But once that surge was over, supply of cattle dropped. Last year, the size of the cattle herd fell to the smallest in decades. Cargill mothballed a beef plant in Texas.
This year, beef packers felt a second blow. As rain and the price of corn have fallen, lowering costs to raise cattle, many producers have chosen to hold back heifers to start rebuilding their herds.
It will take a year to see significant gains in herd numbers and two or three more years to see more cattle heading to packing plants, said Cargill spokesman Mike Martin.
Cargill analyzed where cattle production was likely to snap back and where the industry has a more or less permanent overcapacity, and the upper Midwest had too many plants, Martin said.
With the closure in Milwaukee, Cargill is likely done with closing packing plants, he said.
Todd Domer, spokesman for the Kansas Livestock Association, said some ranchers have already moved to rebuild their herds, while others are taking their time to see whether the drought is really over.
“Some people wanted to see whether it was real or not,” he said. “It will take time, that’s the nature of this business.”
But, Domer said, long-term demand for U.S. beef remains strong domestically and internationally.