Tyson to Cut 400 Jobs, Citing Shrinking Cattle Supply
Company will cease beef production at Iowa location
A box of Tyson Foods’ State Fair brand beef corn dogs. PHOTO: DANIEL ACKER/BLOOMBERG NEWS
Tyson Foods Inc. said it would permanently close an Iowa beef processing plant, the latest move by a major meatpacker to scale back operations because of diminished U.S. cattle herds.
The closure will affect 400 workers, Tyson said Friday. Years of dry conditions in the southern U.S. Plains states forced farmers to reduce their beef herds, leaving meatpackers with fewer animals to process.
“The cattle supply is tight and there’s an excess of beef production capacity in the region,” said Steve Stouffer, president of Tyson’s fresh meats division, in a statement. “We believe the move to cease beef operations at Denison will put the rest of our beef business in a better position for future success.”
The move by Tyson, the largest U.S. meat company by sales, to close the Denison, Iowa, plant is the latest in a string of beef plant closures in response to constrained cattle supplies. Minnesota-based agricultural conglomerate Cargill Inc. last year closed a Milwaukee cattle slaughterhouse after idling a separate beef facility in Plainview, Texas, in 2013. Another major meat firm, National Beef Packing Co., in early 2014 announced the closure of a California processing plant because of cattle shortages.
Beef prices remain at lofty levels in grocery stores after soaring to historic highs in recent years, which has benefited sales of other meats such as pork and chicken. Retail prices for beef products have risen about 10% over the past year through June, to $6.11 a pound, according to the U.S. Department of Agriculture.
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Challenges in the beef business have dented financial results for Tyson, based in Springdale, Ark., which last week reported weaker-than-expected earnings in its most recent quarter. Tyson’s beef division swung to an operating loss for the quarter after a slowdown at U.S. West Coast ports forced the company to sell beef at lower prices because some customers canceled orders, while some cattle sellers charged higher prices for animals.
“There’s a tremendous amount of stress in the sector,” said Don Close, animal protein analyst with agricultural lender Rabobank. Tyson’s Denison plant, which opened in 1961, had been seen as vulnerable, he said, given the proximity of other beef plants with broader processing capabilities.
Tyson said its employees affected by closure of the plant will have the option to apply for jobs at its other locations. Tyson maintains beef plants in Nebraska, Texas, Illinois, Kansas and Washington.
The U.S. meat industry anticipates cattlemen to steer a rebound in the domestic cattle herd as ranching conditions improve and animals fetch higher prices because of the short cattle supply. The USDA in July estimated the U.S. beef cattle herd at 30.5 million, up 3% from last year’s level, which Tyson officials last week said would represent the largest percentage increase since 1980.
Some meatpackers have been expanding. Brazil-based JBS SA, the world’s biggest meatpacker in terms of revenue, in January announced a $75 million investment in its Hyrum, Utah, beef plant, and Iowa Premium LLC last year reopened a beef processing plant in Tama, Iowa.
JBS on Friday reported that its second-quarter profits declined by more than two-thirds to $22.8 million because of an increase in debt-servicing costs, though its U.S. beef division more than doubled profits.
