From: Reuters
Published January 25, 2008 04:36 PM

Beef woes has Tyson reducing cattle slaughter

By Bob Burgdorfer

CHICAGO (Reuters) - Meat producer Tyson Foods Inc <TSN.N> said on Friday it will soon discontinue cattle slaughter at its Emporia, Kansas, plant as part of a restructuring because the U.S. cattle supply is not growing.

Ending slaughter at Emporia will eliminate about 1,500 of the current 2,400 jobs at the plant, the company said. The facility will be used as a cold storage and distribution warehouse, and will process ground beef.

"There continues to be far more beef slaughter capacity than available cattle and we believe this problem will continue to afflict the industry for the foreseeable future," Tyson CEO Dick Bond said in a statement. "We estimate the current slaughter overcapacity in the industry to be between 10,000 and 14,000 head of cattle per day."

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Tyson produces beef, pork and chicken, and its beef unit is the nation's largest, accounting for about 30 percent of U.S. beef production, according to industry sources.

Tyson and other U.S. beef companies have been struggling because competition for cattle has kept cattle prices high, while an abundance of pork and chicken has prevented companies from raising beef prices high enough to cover the cost of those cattle, industry sources said.

In the fourth quarter of 2007, U.S. beef producers on average lost $38.10 on each head of cattle slaughtered, said Bob Wilson, an analyst at consulting firm HedgersEdge.com.

"That is a just a huge number," he said of the loss.

Also, U.S. beef plants, on a weekly average, have been losing money since early July, he added.

CATTLE PRODUCTION SHIFTED

"Cattle production has moved from eastern to western Kansas over the past twenty to thirty years, and the Emporia plant is no longer centrally located in relationship to where most of the cattle it slaughters are raised," said Bond.

In addition, the company does not see any appreciable growth in the U.S. fed cattle supply "over the next two to three years."

"At a time in the cattle cycle when cattle numbers should be at or near their highest, the level of production is not approaching its historic peaks and we do not see any increases in fed cattle production in the foreseeable future," Jim Lochner, senior group vice president of Tyson Fresh Meats, said in the statement.

In addition to Emporia, Tyson's other U.S. beef plants are located in Amarillo, Texas; Dakota City, Nebraska; Denison, Iowa; Finney County, Kansas; Joslin, Illinois; Lexington, Nebraska and Pasco, Washington.

The company also has a beef complex in Canada and is involved in a vertically integrated beef operation in Argentina.

(Editing by Andre Grenon)

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