Tyson Foods announced on Friday that it will close a major beef plant in Nebraska in January amid a decline in U.S. cattle supplies.

The meatpacking giant is set to close a plant in Lexington, Nebraska, with about 3,200 employees. The company also said it will scale back its operations at a beef plant in Amarillo, Texas, moving to a single, full-capacity shift in a move that will affect about 1,700 workers.

Those changes are expected to take effect around Jan. 20, and the company said it will increase production at its other facilities to meet customer demand.

“Tyson Foods recognizes the impact these decisions will have on team members and the communities where we operate. The company is committed to supporting our team members through this transition, including helping them apply for open positions at other facilities and providing relocation benefits,” Tyson Foods said in a statement.

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The company added that the changes will ensure that Tyson Foods can “continue to deliver high-quality, affordable, and nutritious protein for generations to come.”

The Lexington facility can process about 5,000 cattle per day, or about 5% of total U.S. slaughtering, but has already been operating below capacity, Matt Wiegand, commodity broker for FuturesOne in Nebraska, said in a Reuters report.

Beef prices have surged this year as cattle inventory declined to the lowest level in 70 years, which has pushed prices for consumers higher.

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Cattle ranchers have reduced their herds due to drought affecting key ranching regions in recent years, though some have started to slowly rebuild them. It takes at least two years to raise full-grown cattle.

The Bureau of Labor Statistics reported in its September consumer price index (CPI) that beef and veal prices were up 14.7% year over year. Prices for ground beef were up 12.9% last year, while the cost of beef roasts was up 18.4% and prices for beef steaks rose 16.6% in that period.

Those figures far outpaced overall inflation, which was up 3% over the last year, as well as food prices, which rose 3.1% from a year ago as of September.

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Tyson’s beef business suffered adjusted losses of $426 million in the 12 months that ended on September 27 and $291 million over the past year. The meatpacker projected the unit will lose $400 to $600 million in the 2026 fiscal year.

Those losses come despite strong demand from consumers, who are looking past the price increases to buy beef. 

Americans spent over $40 billion on fresh beef in 2024, which made up over half of all fresh-meat sales, according to data from Beef Research, a contractor to the National Cattlemen’s Beef Association.

Reuters contributed to this report.