Hays Feeders has become the latest casualty of the two-year drought that has hit the central plains.
With declining numbers of feeder cattle and feed yards chasing after those cattle, Hays Feeders will close at the end of the year, said Jerry Bohn, general manager of Pratt Feeders that owns Hays Feeders.
A combination of back-to-back drought years has caused substantial increases in feed prices. The drought has also reduced pasture grass.
With less feed and pasture grass, many producers have reduced the number of livestock they are sending to feed lots for finishing.
That sharp decline in cattle numbers combined with the increase in feed prices has made it unprofitable to keep the Hays facility open, Bohn said.
Immediate plans call for the facility to finish out the cattle on hand then shut the facility down by the end of the year.
There are no plans to sell the facility but to keep it available if the cattle market turns around.
“We’re just going to mothball it for now and see what happens,” Bohn said.
Besides Hays, Pratt Feeders also owns feedlots at Ashland and Buffalo, Okla. Some of the Hays employees will go to those other facilities while a couple will be retained at Hays to watch the facility. Some employees have taken jobs at other businesses.
While Pratt Feeders has no plans to sell the Hays facility, if someone shows interest in the plant they would listen to the offer.
The Hays capacity is around 20,000 head. Pratt Feeders purchased the facility in 1999 and it has performed good over the years.
The lack of rain is one of the factors but a key factor leading to the closing of the Hays facility.
Overall, the number of farmers bringing cattle to feedlots for finishing is down 50 percent. The beef markets are up and many producers would rather turn the cattle to cash rather than run the risk of losing money on the high price of feed.
The drought has cause reductions in corn, milo and feed sorghum. Prices for those crops have increased and increasing the cost of feeding cattle for the producers and for the feedlots, Bohn said.
Corn is a primary feed for feedlots but milo is also used if it is available. The feedlot is stretching to buy corn.
For the last year, wheat has been used for feed but the high cost of wheat is even making that unaffordable.
Rain is the key factor in turning the market around. If the area starts getting some good moisture, it will take about three to five years to rebuild the herds. If that happens, it could lead to reopening the Hays facility, Bohn said.
Rain, feed costs, consumer demand, production costs, feedlot demand, government support of ethanol plants and other factors affect the production of beef and right now the combination has had a strong impact on the industry.
“The economics of the business are out of kilter,” Bohn said. “It’s time to cry uncle, cut our overhead and go on.”
Consumers may see an increase in meet prices in the grocery store because of the lack of finishing cattle, said Mark Ploger, Pratt County extension agent.
“Anytime you see a disruption in supply it can force a change in prices,” Ploger said.
But, there are a lot of other factors that come into play besides supply although it sure can be a contributing factor.
“There’s a lot of factors weigh in on that,” Ploger said.
If the reduction in beef does impact the grocery store price it probably won’t come into play until 2013.
Right now, the cattle supply is constant but if that changes it could cause a rise in prices at the grocery store.
Feeding cattle is expensive. Right now it costs about $1.08 to $1.16 a pound to put to raise a pound of beef.
But when it comes down to it, supply and demand still dictate prices at the grocery store. For all the other influences, its what the consumer is willing to pay, Ploger said.