Tyson suspends some beef operations

Cattle Market & Farm Reports, Editorials
Jan 10, 2005
by WLJ
— Four plants shut down for 3-5 weeks.
— Washington plant to single shift.

Tyson Foods last week announced it was temporarily shutting down all shifts in four of its cattle/beef processing facilities and suspending one of two shifts in another facility. The company’s formal statement said the shutdowns are expected to last three to five weeks. There was some indication, however, that one or two plants may be “dark” for a longer period of time.
The four operations suspending all shifts are in Denison, IA; Norfolk and West Point, NE; and Kuna, ID. The second shift is being discontinued at Tyson’s cattle facility in Pasco, WA.
Officials with the company said continued negative processing margins, tight cattle supplies and the absence of key export markets were primary reasons behind the decision. Despite boxed beef movement being better than expected for December, company sources also said they considered 2004 domestic beef demand “lackluster,” and that it needed to pick up before bringing all plants back on line.
"We have been running at less than 75 percent of capacity over the past two months, which is 10 to 15 percent below historical levels,” said Tyson Chairman and CEO John Tyson.
The operational suspensions are expected to reduce the company's weekly cattle slaughter by 25,000-30,000 head, compared to pre-holiday levels. Cattle market analysts said that at full throttle the five processing facilities affected by the shutdowns could account for 9-10,000 head daily, but that level hasn’t been seen in over four years.
U.S. fed cattle marketings were down more than eight percent in 2004, but Tyson said it expects cattle numbers to increase in the coming months. Also, Tyson anticipates the reopening of the U.S. border to Canadian cattle in early March will especially benefit Upper Midwest and Pacific Northwest processing operations.
Following last Thursday’s announcement, the company cut the top end of its fiscal 2005 earnings guidance by five cents a share. Tyson now expects fiscal 2005 earnings of $1.15 to $1.40 a share, compared with a November estimate of $1.15 to $1.45 a share.
The company still expects the majority of its earnings to occur in the last six months of the fiscal year.
A Thomson First Call mean analyst estimate projected earnings of $1.29 for fiscal year 2005, ending in October.
The company still has all shifts operating at its beef processing facilities in Joslin, IL; Emporia and Finney County, KS; Dakota City and Lexington, NE; and Amarillo, TX. Several market analysts expected the company to ramp up processing chain speeds at a couple of those facilities, especially if boxed beef prices saw a $5-8 increase over the next few weeks.
Most sources said it would be easier for Tyson to pick the processing volumes on existing production lines than it would be to reopen plants and not operate at close-to-maximum speed. — WLJ