Cargill expanding Plainview plant
Cargill has begun construction on an expansion of its Plainview, TX, beef plant, according to the plant’s general manager, Jim Rathke. The expansion adds a finely textured beef operation to the existing facility, and beef product that is 93 percent to 96 percent lean as an ingredient in the company’s ground beef, Rathke said. The new operation should be up and running by August and will staff a manager, two shift supervisors, and 17 hourly paid employees. The company will promote from within and then use its normal hiring process to fill additional positions, Rathke said. Cargill’s proposal moved forward last week after local county officials approved a reinvestment zone that will afford the company several tax breaks. Rathke said the reinvestment zone allows the company to afford to add the operation to the facility.
Beef exports to South Korea rebound
U.S. beef exports to South Korea rebounded in January after a two-month consecutive decline, according to Korean media reports. Volume in January reached 5,055 metric tons, a 2.5 percent increase over December’s 4,933 metric tons, the Korea Herald reported, citing a report by the state-run Korea Agriculture Trade Information. The agency said January’s shipments were based on orders made in November and December last year. As the Korean won continued to depreciate against the U.S. dollar, local importers were prompted to buy, the report said.
Australian beef exports may drop slightly
The volume and value of Australian beef exports next fiscal year will vary only slightly from this fiscal year ending June 30, with the impact of an assumed depreciation of the currency offsetting a small decline in the volume of exports, the Australian Bureau of Agricultural and Resource Economics (ABARE) forecasted. Australian beef exports next year are forecast at 920,000 boneless metric tons valued at $4.61 billion (AUS), compared with exports this year forecast at 928,000 tons valued at $4.64 billion (AUS). The number of live cattle exported next fiscal year is forecast to fall 3.2 percent to 760,000 from 785,000 this fiscal year as a result of demand for beef from Indonesia and other southeast Asian countries weakening in line with sharply lower economic growth, ABARE said.
Rescinding covenants costly for Tyson
Tyson Foods said it has increased to $810 million, from $500 million, its previously announced offering of unsecured senior notes due 2014. The notes will have an annual interest rate of 10.5 percent and will be issued at a price equal to 92.756 percent of their face value. Stephens Inc. analyst Farha Aslam estimated the new debt will cost Tyson about $18 million to $28 million annually in additional interest, equivalent to 3 cents to 4 cents per share.
“Tyson is restructuring its debt to reflect the fact that the company no longer has an investment grade rating. Unfortunately, the flexibility of getting out from under the bank covenants has a significant cost,” Aslam wrote in a note to investors.
All protein sectors may decline
Livestock economist Ron Plain cited USDA forecasts for a drawdown in pork, beef, chicken and turkey production for this year versus a year ago. It would be the first time that all four protein sectors will show a yearover-year decrease since 1973 which, he asserted, is directly tied to high feed costs and soft meat demand. “We may well see an additional cut in production in 2010, but that depends on how quickly we can stabilize the economy,” said Plain. “We’ve got banks who are thinking in terms of permanent cutbacks, and even some of these operations are looking at new ways of trying to make a living,” he said. “As the red ink drags on and the longer they lose money, more of them are going to be forced to make some rather permanent plans to downsize.”
Independencia files for bankruptcy
Indepencia S.A., the Sao-Paulo-based company which is working through a restructuring process under Brazilian insolvency law, has also filed for Chapter 15 bankruptcy in a New York City court.
The company cites a decline in beef exports and a burdensome debt load in the U.S. filing, which is being used to seek recognition from U.S. courts of its Brazilian reorganization. In its filing, the company said its total debt was about $1.2 billion, about half of which is in Brazil, while the other half is in the form of private debt issues in the U.S. and other countries. Independencia said sales fell 41 percent between October 2008 and January 2009. Court documents also showed the company owes nearly $105 million to JPMorgan Chase Bank and roughly $99 million to Citibank.