Southern Ag Today

Author: Charley Martinez

  • The Impact of Tyson’s Closure on Beef Slaughter Capacity Utilization

    The Impact of Tyson’s Closure on Beef Slaughter Capacity Utilization

    This year, there have been several Southern Ag Today articles discussing the impacts of tight fed cattle supplies on prices, cattle on feed, slaughter weights, and total beef production (Anderson 2025a, Anderson 2025b, Maples 2025). On November 21, Tyson announced that they would be closing their Lexington, Nebraska plant in January 2026. Following the announcement, there have been a lot of questions revolving around the impact of the closure on national slaughter capacity utilization (CU). 

    The Lexington, Nebraska plant had an approximate daily capacity of 5,000 head. That equates to approximately 20% of Tyson’s daily capacity (25,800 head/day) as a company. In Martinez et al. (2023), we showed a measure of national slaughter capacity utilization, which measures the ratio of operational cattle slaughter capacity over total physical capacity. To estimate the impact of the closure on the national CU, we use 2025’s monthly slaughter with an adjusted 2025 slaughter CU. The adjusted CU is simply adjusting the national CU with the daily 5,000 head taken out. Figure 1 displays the monthly national federally inspected (FI) slaughter capacity utilization with the previous 5-year average (thick blue line), 2024 (orange dotted line), 2025 (grey thin line), and 2025-Adjusted (green dashed line). 

    Figure 1. Monthly National Federally Inspected Slaughter Capacity Utilization

    The adjusted capacity utilization is closer to the previous 5-year average. Evaluating data through November, the average for the 5-year average was 90.1% while the 2025 and 2025-adjusted average through November are 83.1% and 87.7%, respectively. In November, slaughter capacity utilization averaged 83.5%, which was lower than November 2024 (88.4%), the previous 5-year average (89.8%), and the 2025-adjusted (87.8%).Overall, 2025 has seen declining fed cattle numbers in the cattle on feed reports and higher fed cattle prices, leading to low or negative packer margins. While the supply chain is offsetting tight cattle supplies with larger carcasses, the closure of the Lexington plant certainly signals there is excess capacity at this time. This is the first large scale plant to close since 2013, when Cargill closed their Plainview, TX plant, which was also during a time when cattle supplies were tight.  There have been reports that Tyson is looking to buy that Plainview plant. Additionally, there are some plants that are reported to come online in 2026 and 2027. It is fair to question if the adjusted capacity utilization is a new norm, or simply a short run adjustment by the supply chain.

    References

    Anderson, David. “Fewer Marketings, Tighter Beef Supplies.” Southern Ag Today 5(26.2). June 24, 2025. 

    Anderson, David. “Working Less on Friday!” Southern Ag Today 5(21.2). May 20, 2025.

    Maples, Josh. “Cattle Prices Hit New Highs and Carcass Grading Trends Over Time.” Southern Ag Today 5(19.2). May 6, 2025.

    Martinez, C., Li, P., Boyer, C. N., Yu, T. E., & Maples, J. G. (2023). Beef price spread relationship with processing capacity utilization. Journal of the Agricultural and Applied Economics Association.https://onlinelibrary.wiley.com/doi/full/10.1002/jaa2.48

    Martinez, Charley, and Parker Wyatt. “The Impact of Tyson’s Closure on Beef Slaughter Capacity Utilization.” Southern Ag Today 5(49.2). December 2, 2025. Permalink

  • A Check in on the Beef Cutout

    A Check in on the Beef Cutout

    The current government shutdown has caused many weekly and monthly reports to not be published. However, USDA-AMS is still generating their daily and weekly reports. The beef industry knows that tight supplies have led to increased price movements over the last couple of years, but beef demand has become a hot topic as of late due to retail beef prices continuing to set all-time highs every month. These market movements have led to a common question, “could demand be decreasing and that’s why the cutout has been decreasing?” One data series that offers valuable insight into the intersection of beef supply and demand is the cutout value.

    Figure 1 shows the weekly choice cutout value for this year, last year, and the previous 5-year average. In mid-September, the choice cutout peaked at $413.60/cwt, has steadily decreased each week, and finished last week at $365.25/cwt. This decline is somewhat expected due to seasonality trends. However, last week’s price was $56.82/cwt (18.4%) and $113.57/cwt (45.12%) higher than last year and the previous 5-year average for the same week. Even though the market has experienced peaks and recent declines in the choice cutout value, year-over-year demand indices suggest historically strong demand as consumers pay higher prices for the smaller amounts of beef available.  

    Consumers make choices not only between cuts of beef but also grades of beef. Figure 2 shows the monthly cutout values by grade for the last 12 months. Since March of this year, each cutout grade has trended upward through September. Interestingly, the last two months have also had increasing spreads between prime and all other grades. To the question posed in the introduction paragraph, there is little data to suggest weakening demand. Tight beef supplies are driving prices higher and consumer demand is holding strong. Consumers will eat less beef overall in 2025 due to less availability, but the higher prices will allocate the various grades and cuts of beef to consumers.  

    Figure 1. Weekly Choice Cutout Value

    Figure 2. Monthly Graded Cutout Values for the previous 12 months

    Martinez, Charley, Parker Wyatt, and David Eli Mundy. “A Check in on the Beef Cutout.” Southern Ag Today 5(42.2). October 14, 2025. Permalink

  • Current Non-Real Estate Farm Debt for Quarter 1 of 2025

    Current Non-Real Estate Farm Debt for Quarter 1 of 2025

    As mentioned in previous Southern Ag Today (SAT) articles (Martinez and Ferguson 2022, Martinez 2023), monitoring Non-Real Estate Farm Debt provides insight into debt health. At the time of this article, harvesting is on many people’s minds, producers are baling hay, tariffs are a constant conversation, and livestock prices are at all-time highs. Last month’s reports offer the most recent snapshot of 2025 debt health. As a refresher, every commercial bank in the U.S. submits its quarterly Reports of Condition and Income, which are known as call reports. Within these call reports are totals of agricultural loans and the status (on time or late) of the loans. Figure 1 displays the total loan volume (yellow line) and loan volume for three late categories (30-89 days late, 90+ days late, non-accrual) for the last 17 quarters (4.25 years). The totals are for all the Southern Ag Today States. 

    In the first quarter of 2025, non-accrual (blue line) loans increased 80% from 2024 Q4. This makes the total amount the highest since 2021 Q4. Loans that are 90+ days late (grey line) remained relatively the same as 2024 Q4. The most concerning statistics are the loans that are 30-89 days late (orange line), which increased to $108.9 million in the SAT states. While this loan type seasonally increases in Q1, the amount increased 196% compared to 2024 Q4, and 146% compared to 2024 Q1. All states increased in these bad loan types, except for Louisiana (decreased by 20%). Due to the varying size of states, measuring the percentage of 30-89 days late loans compared to total loan volume is a good way to compare the SAT states and the impacts of these bad loan types. In 2024 Q1, the quarterly average of 30-89 days late loans to total loan volume was 0.3% (which is stable), with the highest being Oklahoma and Tennessee at 0.5%. In contrast, the 2025 Q1 quarterly average increased to 0.7% (which is still stable), with Alabama (3.1%) and Arkansas (1.4%) being the only two states above the average. For perspective, in 2024 Q1, Arkansas and Alabama were 0.3% and 0.1%, respectively, thus their 2025 Q1 measures lead to them not only increasing in bad loan types, but they are also the only states to have year-over-year increases above 1%. When comparing the percentage of total loan debt (non-accrual, 30-89 days late, and 90+ days late) compared to total loan volume, the quarterly average was 1%. Florida, North Carolina, and South Carolina were the only three states below 1%. Alabama (6%) and Arkansas (2%) were the only two states above the quarterly average. Total loans (yellow line) are down from the previous quarter, which is expected due to seasonal trends. Total loan volume was up 4% compared to 2024 Q1. 

    From a sky-high view, the 2025 Q1 reports provide an indication of overall debt health following a tough profitability year for many row crop operations, and a strong revenue year for livestock producers in the SAT states. The Q1 reports indicate that some states are in stable conditions, but there are some states that have signals of concern. The concern leans towards the row crop side. Price prospects for many row crop operations for the rest of the year, and moving into next, have limited upside potential due to abundant domestic and global supplies. Thus, government payments will play a role in these bank reports moving forward. Last year’s government payments will likely assist in lowering some bad debt in the 2025 Q2 reports and offset some Q1 bad debt. I would expect government payments from ARC and PLC to occur again for this crop year (will not be received until October 2026), but having two consecutive years of being in survival mode strains the balance sheets and cash flow for producers and many will need to begin working with agricultural lenders to secure credit for 2026 earlier than a typical year. In the coming months, it is crucial that producers are mindful of their working capital and continue the positive production and risk management strategies they have implemented thus far. 

    Figure 1. Non-Real Estate Farm Debt from 2021 Q1- 2025 Q1 

    Source: Federal Financial Institutions Examination Council

    References

    Martinez, Charley, and Haylee Ferguson. “Current Non-Real Estate Farm Debt“. Southern Ag Today 2(30.3). July 20, 2022. Permalink

    Martinez, Charley, and Parker Wyatt. “Current Non-Real Estate Farm Debt for Quarter 1 of 2025.” Southern Ag Today 5(36.1). September 1, 2025. Permalink

  • Beef Slaughter Capacity Utilization

    Beef Slaughter Capacity Utilization

    In recent months, there have been Southern Ag Today articles discussing the impacts of tight fed cattle supplies on prices, cattle on feed, slaughter weights, and total beef production (Anderson 2025a, Anderson 2025b, Maples 2025). Each of the articles mentioned has highlighted the unique and historical differences between the current market and years past. One aspect that has not been covered, but is important, is slaughter capacity utilization (CU). In Martinez et al. (2023), we show how we measure slaughter capacity utilization, which measures the ratio of operational cattle slaughter capacity over physical capacity. Figure 1 displays the monthly national federally inspected (FI) slaughter capacity utilization. 

    Figure 1. Monthly National Federally Inspected Slaughter Capacity Utilization

    In May, slaughter capacity utilization averaged 82%, which was lower than May 2024 (88.29%), and the previous 5-year average (87.56%). Additionally, through the first five months of 2025, capacity utilization averaged 84.57%, which is lower than the same time frame last year (86.64%), and the previous 5-year average (88.57%). Historically, in March and April, the ramp up of slaughter for grilling season occurs, followed by a decrease for 1 to 2 months. Thus, the decrease this year from March (86.06%) to May was expected. 

    While May’s utilization is down 8.29% compared to May 2024, commercial beef production (figure 2) in May was down 7.53% compared to May 2024 and down 4.67% compared to the previous 5-year average. Through May, total commercial production is averaging 497.8 million pounds per month, which is also lower when compared to 2024 (504.95 million pounds per month) and the previous 5-year average (513.12 million pounds per month). When comparing total production, 2025 production is 1.33% lower than last year and 2.98% lower than the previous 5-year average.

    Figure 2. Monthly National Commercial Beef Production

    Overall, the decline in 2025 capacity utilization compared to last year (down 2.07%) and the previous 5-year average (down 4%) is larger than the decline in total production compared to last year (down 1.33%) and the previous 5-year average (down 2.98%). Therefore, the increasing utilization difference between 2024 and 2025 signals the impact and realization of the tight supplies on capacity utilization. However, the supply chain is offsetting the tight supplies with larger carcasses and has led to market signals to have lower discounts for heavier cattle while operating at lower capacity utilization. As we get into the second half of the year, it will be interesting to see where capacity utilization and slaughter weights measure given even tighter supplies based on the latest Cattle on Feed reports. 

    References

    Anderson, David. “Fewer Marketings, Tighter Beef Supplies.” Southern Ag Today 5(26.2). June 24, 2025. 

    Anderson, David. “Working Less on Friday!” Southern Ag Today 5(21.2). May 20, 2025.

    Maples, Josh. “Cattle Prices Hit New Highs and Carcass Grading Trends Over Time.” Southern Ag Today 5(19.2). May 6, 2025.

    Martinez, C., Li, P., Boyer, C. N., Yu, T. E., & Maples, J. G. (2023). Beef price spread relationship with processing capacity utilization. Journal of the Agricultural and Applied Economics Association.https://onlinelibrary.wiley.com/doi/full/10.1002/jaa2.48

  • Current Non-Real Estate Farm Debt

    Current Non-Real Estate Farm Debt

    As mentioned in previous Southern Ag Today (SAT) articles (Martinez and Ferguson 2022, Martienz 2023), monitoring Non-Real Estate Farm Debt provides insight into debt health. Last year, there were periods of drought and increased input prices for producers. At the time of this article, planting is on everyone’s mind (completed or about to start), producers are bailing hay, and all prices in every supply chain are working their way through tariffs. The most recent reports offer insights through the end of 2024. As a refresher, every commercial bank in the U.S. submits their quarterly Reports of Condition and Income, which are known as call reports. Within these call reports are totals of agricultural loans and the status (on time or late) of the loans. Figure 1 displays the total loan volume (yellow line) and loan volume for three late categories (30-89 days late, 90+ days late, non-accrual) for the last 16 quarters (4 years). The totals are for all the Southern Ag Today States. 

    Through the end of 2024, non-accrual (blue line) loans continued to decrease, which is positive, and loans that are 90+ days late (grey line) remained relatively the same. Total loans (yellow line) are down from the previous quarter, which is expected due to seasonal trends. But, total loan debt is up 4.8% compared to 2023. The most concerning statistic is the loans that are 30-89 days late (orange line). At the end of 2024, debt that was 30-89 days late, was up 5.2% compared to the end of 2023 and the highest since Q1 of 2021. Q1 is seasonally the highest quarter for 30-89 days late loans, but given that it’s up from a year ago, the Q1 2025 reports will provide an indication of debt health in 2025 and moving forward.

    From a sky high view, the call reports indicate that there are some possible caution signals for debt in the SAT states. Total non-current debt is approximately 1%, which is still relatively low. The next two quarters will provide answers if the signals are false alarms or true signals of concern. In the coming months, it is crucial that producers are mindful of their working capital and continue the positive production and risk management strategies they have implemented thus far. 

    Figure 1. Non-Real Estate Farm Debt from 2021 Q1- 2024 Q4 

    Source: Federal Financial Institutions Examination Council

    References

    Martinez, Charley, and Haylee Ferguson . “Current Non-Real Estate Farm Debt“. Southern Ag Today 2(30.3). July 20, 2022. Permalink

    Martinez, Charley, and Parker Wyatt. “Current Non-Real Estate Farm Debt.” Southern Ag Today 5(20.1). May 12, 2025. Permalink