BEEF bits

Dec 30, 2008
by WLJ

BEEF bits

Tyson to cut beef, chicken production

In order to better match supply with shrinking demand, Tyson Foods Inc. is cutting both beef and chicken production, the latter of which marks a significant development in the poultry industry, according to Stephens Inc. analyst Farha Aslam. “While the beef cuts are positive, the chicken cuts are truly significant,” Aslam wrote in a note to investors. “This is the first time in the 12-month industry downturn that there is any indication that Tyson is willing to rationalize production.” Aslam notes Tyson has a 20-25 percent market share, meaning its cuts could have a significant impact on the overall poultry industry’s supply and pricing. She estimates Tyson is cutting chicken production by 5 percent, as industry estimates indicate demand is down 4 percent to 6 percent.

EU attacks hormone-treated beef

The European Union (EU) recently launched a fresh challenge at the World Trade Organization (WTO) against sanctions imposed by the U.S. and Canada on the EU for its ban on hormone-treated beef from the two countries. The dispute over the EU ban on beef from animals administered certain growth-promoting hormones dates back to 1996, with the new EU challenge coming after a WTO appeal body recommended that an earlier ruling against Brussels be reconsidered. “We are convinced that our legislation on hormones is fully in line with WTO law; the restrictions on hormone-treated beef are based on solid scientific evidence showing risks for human health,” said EU spokesman Peter Power.

Beef exports continue strong growth

Despite predictions that international trade numbers will shrink in 2009 for the first time in 25 years, U.S. pork exports continued to post strong growth in the 2008 January to October period, according to USDA. Beef exports through October 2008 totaled $2.6 billion, an increase of 46 percent over $1.78 billion of 2007. Canada and Mexico account for 52 percent of exports, with Mexico at $835 million in 2008 compared to $697 million in 2007. In 2003, pre-BSE, Mexico imported $674 million. Exports to Canada are also up, $527 million compared to $404 million in 2007. Exports for all of 2003 to Canada totaled $257 million.

Exports to Korea and Japan are up by 109 percent and 61 percent respectively. JBS hopes to settle antitrust suit The Department of Justice (DOJ), JBS S.A. and National Beef Packing Co. have agreed to stay court proceedings intended to block JBS’s acquisition of National Beef, signaling an effort to settle the case. Documents filed with the U.S. District Court in Chicago reveal a settlement opportunity that could include both packers selling plants to enhance competition.

“Plaintiffs will need to investigate any serious settlement proposal to determine whether it would adequately restore the competition that would be lost if JBS S.A. acquires National Beef,” the DOJ filing states. “Plaintiffs must ensure that any divestiture proposal includes all of the assets necessary for a purchaser to be an effective, independent, long-term competitor, including the tangible and intangible assets necessary for purchasing, production, distribution, and sales.”

Cargill to replace Booneville plant

Cargill Value Added Meats Foodservice (CVAM), a division of Cargill Meat Solutions, was heavily damaged when its Booneville, AR, production plant was destroyed by fire in March. In place of the lost production, CVAM found an opportunity to acquire the assets of Carneco Foods LLC in Columbus, NE, including a highly reputed production facility. CVAM takes over the facility, which currently employs 300, on Jan. 2. The company already has held a week of interviews for positions in the new operation, though exact staffing levels have not yet been determined. Cargill says the plant complements its frozen ground patty business particularly well and fits the company’s strategy.

Agriprocessors courted by 12 buyers

The court-appointed trustee that is overseeing Agriprocessors Inc.’s bankruptcy case said in a progress report that at least 12 companies have expressed interest in possibly buying all or a part of the kosher meat processor. The company’s operations were crippled by a May raid by agents of Immigration and Customs Enforcement and, subsequently, by criminal charges filed against the company’s former CEO and several other managers and employees. The charges range from identity theft to bank fraud to harboring undocumented immigrants. The company was able to resume partial production with the aid of two emergency cash infusions, totaling $3.37 million, from St. Louis-based First Bank, to which Agriprocessors already owes $33 million.