Return of Agri Star beef line adds optimism to industry
By MATTHEW WILDE • Waterloo-Cedar Falls Courier
After two years of unprecedented losses, livestock experts say economic indicators point to better times ahead for cattle feeders. Feed is cheaper and the economy is improving, which should help domestic demand.
The recent announcement by Agri Star Meat and Poultry of Postville to restart its beef line soon is one of the biggest reasons farmers and industry officials are optimistic these days. In fact, experts believe an extra cattle buyer will make other processors bid more for animals to insure supply.
"It's kind of nice to look at some black ink or potential black ink," said Shane Ellis, Iowa State University Extension livestock economist.
Triple-digit losses were common in 2008 and '09 for cattle feeders. In December 2008, for example, ISU Extension figures show feedlot operators lost between $220 to $250 on every market steer sold.
January returns show losses have dwindled to between $35 and $57. Ellis expects positive returns by summer, maybe sooner if Agri Star starts buying cattle.
Numerous factors back up Ellis' prediction:
Cattle brought $4 per hundredweight more in January at $87.20 compared to a month earlier.
Corn, a primary feed source, has dropped significantly. In January 2009, corn averaged $4.44 per bushel compared to $3.50 last month.
Cattle supplies are dropping. As of Jan. 1, the U.S. Department of Agriculture reported 3.85 million cattle and calves in the state, a 2.5 percent drop compared to a year earlier. Nationally, the cattle inventory declined by 1 percent during the same time.
Maybe most importantly, Ellis said Agri Star will put pressure on Tyson Fresh Meats in Denison, the state's lone beef processor, and other processors in Nebraska, Wisconsin and Illinois that vie for Iowa cattle.
"It won't have a big impact in the beginning, but it will have a positive bump in prices locally," Ellis said.
Industry experts believe cattle bids will increase by $1 to $2 per hundredweight. Trucking expenses will decrease by one-third for many farmers, sources said.
"For a lot of guys, this could put them back to break even," Ellis said.
Agri Star, successor to Agriprocessors, announced late last month it plans to hire 150 workers to resume its beef kill and expand turkey processing. It currently employs about 400 workers.
Agriprocessors was the largest kosher beef processing facility in the nation. The company collapsed following a huge immigration raid in May 2008 and eventually filed for bankruptcy.
Hershey Friedman purchased the plant last fall. In November, Agri Star reportedly secured a $600,000 loan and tax incentives from the state as part of a $6.85 million renovation plan for the beef line.
Agri Star officials told The Courier Tuesday the company will begin contacting cattlemen and sales barns later this month to line up cattle.
The company expects to process 75 to 100 head per day initially and up to 250 by the end of the year.
"Future production will be determined by the markets' response to the Agri Star product," according to a prepared statement by the company. "There is a large demand for the highest quality kosher beef and Agri Star has invested heavily to meet that need."
Cattle feeder Scott McGregor of Nashua can't wait. He's a partner in a 1,200-head feeding operation with his brothers, Alan and David McGregor. The family used to sell exclusively to Agriprocessors, but now cattle predominantly go out of state.
Scott McGregor believes reopening the beef kill will help all area cattle farmers.
"The Northeast Iowa market has been stagnant the last two years. There just wasn't a lot of competition," McGregor said. "It would make bids stronger."
An Agri Star spokesman said the company will purchase cattle on a cash basis using a combination of live, hot-scale and graded purchase options. Purchasing will occur through a combination of independent farmers and sales barns.
The Waverly Sales Barn holds cattle auctions every Tuesday. Co-owner Ron Dean said it will be nice to have another buyer in the stands.
"The more cattle they bring, the more we make," Dean said. "The sellers are happy because they make more," Dean said.
People interested in selling to Agri Star can call (563) 864-7811.