Timely Topics
Beef has been in the headlines the past two weeks, imported beef for hamburger in particular. But there is much more happening in the cattle market than hurt feelings and wishful thinking for lower prices in the meat case for ground beef. There are signs of much more fundamental changes in the cattle market with direct impacts on Virginia and Rockbridge County cattle producers.
Last month this column highlighted news of the closing of a large beef processing plant just outside Philadelphia, owned by the JBS Foods, because cattle prices were too high for the plant to profitably operate.
Two weeks ago, another major beef processor, Tyson Foods, announced it was closing similarly large processing plants, one in Missouri and the other in Utah, while putting a third in the Pacific Northwest up for sale. Simultaneously, Tyson announced it would begin slaughtering additional cattle at its processing plant in Amarillo, Texas, by adding another shift. This move will allow Tyson to utilize existing fixed assets in Amarillo more efficiently while shedding employees from its payroll in an attempt to restore profitability to the company.
The beef plant closures mean there will be fewer available spaces for cattle to be processed each day. Without any change in the supply of cattle, the same number of cattle will be competing for fewer available spaces for processing and, significantly for the East Coast, these available spaces will be further way.
When we look at USDA market reports showing prices for cattle in Nebraska, or Indiana or Virginia, we see that the price at each of these locations for the same type of cattle is different. Sevenhundred- pound feeder calves like Virginia is so good at producing are worth more in Nebraska than they are in Virginia because Nebraska is closer to the large concentration of buyers for this type of c attle. T his d ifference i n price in commodity markets is called “basis.”
The basis for Virginia beef cattle has long been negative relative to the prices paid for cattle in Nebraska or Texas. Cattle in Virginia bring less money (traditionally 5 cents to 15 cents per pound for the same type and quality of cattle) because of the transportation cost and production risk the buyer (often in a Midwestern state) must accept when buying cattle from Virginia. The “production risk” is mostly the risks associated with Virginia cattle having to adapt to a new environment and different feeds when they leave Virginia pastures to grow further in Oklahoma, Kansas or Iowa before reaching slaughter weight.
This difference in price also applies to breeding stock that are no longer productive. These cattle are often referred to as “pound cows” because they are sold strictly by the pound since they will be processed into ground beef and other products.
With the closure of beef processing plants, both our calves and unproductive breeding stock will have to travel further to reach a feeding operation or processing plant. This means additional travel cost and greater production risks associated with our cattle having to adapt to environments much different from Virginia.
In other words, our “basis” for beef cattle is likely to become “more negative” by a few cents per pound. A “few cents per pound” applied to animals weighing 600 to 1,200 pounds becomes $20 or $40 less on every beef animal sold.
These large processing plants were closed after a long period of unprofitable operation. They are very unlikely to re-open. Rockbridge cattle producers must incorporate the price differential known as “basis” into their long-term planning and this differential will be larger going forward than it has been historically.
Rockbridge Fair And Expo Update
Availability of the 2026 Fair Book announced in last week’s column was delayed but books and expo tags should now be available at Rockbridge Extension Office, House Mountain Yarn Shop, Rockbridge Farmer’s Cooperative, Farm Credit of the Virginia’s, Tractor Supply in Buena Vista, Augusta Cooperative Fairfield Store, and Natty Bees Café in Natural Bridge.
For more details or contact the Expo coordinators at rockcohomesteaders@ gmail.com.
