Tyson Foods Expands Into Argentina
By Kim Souza
The Morning News
Email this story Print this story Comment on this story After months of negotiations Springdale-based Tyson Foods Inc. announced Friday it has formed a joint venture with two Argentine beef companies that could help it expand its international channels of beef distribution.
The joint venture -- which will result in to create a fully integrated beef operation located in Santa Rosa, Argentina -- is the meat giant's first participation in a beef operation located outside of North America. The company owns and operates a large beef processing facility in Alberta, Canada and eight American beef processing plants.
Tyson said it will partner with Cactus and Cresud who together have operated an Argentine feedlot since 1999.
Tyson Foods has a majority share in the joint venture owning slightly more than half of the new company's interest, said Tyson spokesman Gary Mickelson.
The financial terms of the deal were not disclosed.
Cactus Feeders is based in Amarillo, Texas, and also operates nine large-scale U.S. feedlots. Cresud is a leading cattle company involved in both crop production and cattle raising in Argentina, the release said.
Tyson is lending its experience in processing and marketing to the new joint venture that includes all three companies, Rick Gruebel, vice president of Tyson's international division said in the release.
The new venture will include a cattle feedlot and a boxed beef processing plant located in central Argentina.
"We believe our combined expertise will create a great new company that will be able to produce products for domestic consumption as well as export," Gruebel said in the release.
The scope of the overall operation is small compared to Tyson's U.S. beef business, but it offers the company a chance to grow its international exposure and is in line with the company's long term strategy, said Farha Aslam, analyst with Stephens Inc. (Stephens Inc. provides investment banking services for Tyson Foods and expects to receive compensation for those services in the next three months.)
Tyson Foods reported total beef sales of $11.82 billion in 2006. The company estimates the new venture will post between $30 to $35 million in sales for 2007.
While the overall projected sales of the new venture pales in comparison to Tyson Foods' beef segment sales, Dr. Ka Zeng, a professor of international relations at the University of Arkansas, said not to underestimate the value of this partnership.
"Tyson's move into a joint-venture within Argentina gives the company channels of distribution already established and access to countries for beef export they can't get from the United States," Zeng said.
Lower labor, livestock and energy costs are advantageous for raising beef in Argentina, it is the fifth largest leading producer of beef and veal and the second leading exporter of beef in the world, according to the press release.
This venture allows Tyson Foods to participate and grow sales in a new region with minimal costs because it is working with partners who already know the region, Zeng said.
Beef exports from the United States to Argentina would face high tariffs and the difference in currencies would make the imported product more expensive, according to the Argentina Exporter Guide written in November by the USDA's Foreign Agricultural Service
The beef produced by the venture will be marketed for the Argentine consumer as well as give Tyson Foods access to European and other high value beef markets.
Tyson said the new plant has already received approval to ship product to the European Union as well as other countries.
"The top two markets for all of South American beef exports are the European Union and Russia. In 2007, both Russia and EU rank are expected to rank second and third in beef imports behind the United States," said Greg Doud, economist with the National Cattlemen's Association.
Reductions of subsidies in the EU and growth in the Russian economy have pushed these countries ahead of Japan -- a situation world meat trade officials are watching closely, he said.
While the United States recently signed an agreement to allow beef exports to Russia, more time is needed for plant visits and other governmental red tape before actual shipments will begin, said Lynn Heinze, spokesman for the U.S. Meat Export Federation.
Although one of Tyson's American plants is approved to ship beef to the European Union, Mickelson said the company is not shipping beef to the EU at this time.
Tyson Foods Inc. International Sales
In fiscal 2006 international sales totaled $2.81 billion or 11 percent of total sales, down $455 million from fiscal 2005.
2006 2005
Mexico $702 million $725 million
Canada $618 million $609 million
Japan $224 million $261 million
Russia $196 million $261 million
China $196 million $174 million
South Korea$140 million $116 million
Italy $112 million $116 million
These sales reflect both meat and poultry exports and sales made by Tyson Foods, including its joint ventures and other companies based outside the United States.
Source: Tyson Foods Inc.
Hear that GIANT SUCKING SOUND?
By Kim Souza
The Morning News
Email this story Print this story Comment on this story After months of negotiations Springdale-based Tyson Foods Inc. announced Friday it has formed a joint venture with two Argentine beef companies that could help it expand its international channels of beef distribution.
The joint venture -- which will result in to create a fully integrated beef operation located in Santa Rosa, Argentina -- is the meat giant's first participation in a beef operation located outside of North America. The company owns and operates a large beef processing facility in Alberta, Canada and eight American beef processing plants.
Tyson said it will partner with Cactus and Cresud who together have operated an Argentine feedlot since 1999.
Tyson Foods has a majority share in the joint venture owning slightly more than half of the new company's interest, said Tyson spokesman Gary Mickelson.
The financial terms of the deal were not disclosed.
Cactus Feeders is based in Amarillo, Texas, and also operates nine large-scale U.S. feedlots. Cresud is a leading cattle company involved in both crop production and cattle raising in Argentina, the release said.
Tyson is lending its experience in processing and marketing to the new joint venture that includes all three companies, Rick Gruebel, vice president of Tyson's international division said in the release.
The new venture will include a cattle feedlot and a boxed beef processing plant located in central Argentina.
"We believe our combined expertise will create a great new company that will be able to produce products for domestic consumption as well as export," Gruebel said in the release.
The scope of the overall operation is small compared to Tyson's U.S. beef business, but it offers the company a chance to grow its international exposure and is in line with the company's long term strategy, said Farha Aslam, analyst with Stephens Inc. (Stephens Inc. provides investment banking services for Tyson Foods and expects to receive compensation for those services in the next three months.)
Tyson Foods reported total beef sales of $11.82 billion in 2006. The company estimates the new venture will post between $30 to $35 million in sales for 2007.
While the overall projected sales of the new venture pales in comparison to Tyson Foods' beef segment sales, Dr. Ka Zeng, a professor of international relations at the University of Arkansas, said not to underestimate the value of this partnership.
"Tyson's move into a joint-venture within Argentina gives the company channels of distribution already established and access to countries for beef export they can't get from the United States," Zeng said.
Lower labor, livestock and energy costs are advantageous for raising beef in Argentina, it is the fifth largest leading producer of beef and veal and the second leading exporter of beef in the world, according to the press release.
This venture allows Tyson Foods to participate and grow sales in a new region with minimal costs because it is working with partners who already know the region, Zeng said.
Beef exports from the United States to Argentina would face high tariffs and the difference in currencies would make the imported product more expensive, according to the Argentina Exporter Guide written in November by the USDA's Foreign Agricultural Service
The beef produced by the venture will be marketed for the Argentine consumer as well as give Tyson Foods access to European and other high value beef markets.
Tyson said the new plant has already received approval to ship product to the European Union as well as other countries.
"The top two markets for all of South American beef exports are the European Union and Russia. In 2007, both Russia and EU rank are expected to rank second and third in beef imports behind the United States," said Greg Doud, economist with the National Cattlemen's Association.
Reductions of subsidies in the EU and growth in the Russian economy have pushed these countries ahead of Japan -- a situation world meat trade officials are watching closely, he said.
While the United States recently signed an agreement to allow beef exports to Russia, more time is needed for plant visits and other governmental red tape before actual shipments will begin, said Lynn Heinze, spokesman for the U.S. Meat Export Federation.
Although one of Tyson's American plants is approved to ship beef to the European Union, Mickelson said the company is not shipping beef to the EU at this time.
Tyson Foods Inc. International Sales
In fiscal 2006 international sales totaled $2.81 billion or 11 percent of total sales, down $455 million from fiscal 2005.
2006 2005
Mexico $702 million $725 million
Canada $618 million $609 million
Japan $224 million $261 million
Russia $196 million $261 million
China $196 million $174 million
South Korea$140 million $116 million
Italy $112 million $116 million
These sales reflect both meat and poultry exports and sales made by Tyson Foods, including its joint ventures and other companies based outside the United States.
Source: Tyson Foods Inc.
Hear that GIANT SUCKING SOUND?