February 7, 2002 Associated PressIf a new meatpacking plant were built to replace the Federal Beef Processors Inc. plant, which was destroyed by fire last week, it would face a number of challenges, industry experts said.
Meat-processing plants are expensive to build and operate with marginal profits. In fact, the industry is closing plants around the country. "It's a very capital-intensive business with, certainly, a great amount of government regulation," said Steve Hunt, CEO of U.S. Premium Beef.
Despite what some ranchers may think, meatpacking companies do not make a lot of money, Hunt said. The business is a competitive one with very thin margins.
Today packers prefer big, streamlined operations that process thousands of fed calves a day, experts said. Few plants process cows, bulls and other animals that usually end up as hamburger.
Before the Jan. 30 fire, Federal Beef slaughtered up to 600 head of cattle a day, plant workers said. It slaughtered some fed calves, but was one of the few cow-kill plants in the region. For these plants, the problem of high costs and low profit margins are compounded.
"It's especially a problem in the cow kill," said Glenn Schmidt, a Colorado State University professor and 30-year veteran of the livestock industry.
Other meatpacking companies, such as IBP, are closing or selling cow-kill plants.
One reason is that the market for bones, hide and other byproducts, which are important when profits are low, has collapsed. Animal byproducts used to be ground up into cattle feed. But the practice has been outlawed after being linked to the spread of mad cow disease.
And the high cost of diesel and other fuels has added to transportation costs. Also, pending legislation may outlaw or restrict the slaughter of animals that have been damaged by injury or illness.
The Goldbergers, the Minneapolis family that owns Federal Beef, still has not said whether it will rebuild. Shortly after the fire, the family sent out a news release indicating interest in working with state and local government to consider the idea.