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Tyson is simply restructuring

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Well-known member
Feb 10, 2005
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Tyson Foods' closure of packing plants in Norfolk and West Point, Neb., putting more than 1,600 people out of work, likely is an isolated case of restructuring and not a harbinger of more industry shutdowns, experts said.

"I don't think you'll be seeing this in the future - continued closing of factories," said Dillon Feuz, a livestock marketing specialist at the University of Nebraska's Panhandle Research and Extension Center in Scottsbluff. "I think we'll start to see (profit) margins improve this year."

Meatpacking is big business in Nebraska. The state ranks No. 2 in the country behind Texas in commercial cattle slaughter, at about 7.6 million cattle processed each year.

The meat processing industry, including the slaughter of beef, pork and poultry in large plants and small meat lockers across the state, employs more than 26,000 of Nebraska's 774,913 workers. That is about 3.4 percent of the jobs in Nebraska and about 25 percent of the state's manufacturing jobs, according to the State Department of Economic Development.

Big beef plants are economic mainstays in communities such as Schuyler, a city of 5,200 with a 2,100-employee Cargill plant, and Lexington, which has a population of 10,000 and a Swift & Co. beef plant that employs 2,700 people.

Other large beef plants around the state include Swift's 500-employee facility in Omaha and the Greater Omaha Packing Co., which employs 688 people.

The director of the Schuyler Area Chamber of Commerce, Marlene Moore, said no one appeared to be worried about that city's meatpacking plant after Tyson announced its closures in the northeast.

"We have a lot of faith in our plant here and its supervision," Moore said. "Nobody seems too concerned."

Meatpacking companies nationwide have had a difficult two years, with low cattle supplies squeezing profit margins and many foreign markets closed to American beef because of concerns about mad cow disease. The United States closed its borders to all Canadian cattle for two years over a case of mad cow disease before easing that ban in July.

Tyson, based in Springdale, Ark., cited those factors when it closed its two plants last week. However, the company said it also could improve efficiency overall by redirecting much of the work from the Norfolk and West Point plants to its 3,600-employee operation in nearby Dakota City, Neb.

"The consolidation will enhance the performance of our beef business, both now during this time of challenging market conditions and later when these conditions improve," said Noel White, group vice president of Tyson Fresh Meats.

Tyson said it had no immediate plans to consolidate other plants, and Feuz, the university marketing specialist, said he did not think it was the start of a new wave of beef plant closings.

"I don't think that's the case," Feuz said. "It's more of a restructuring within their company."

Creighton University economic professor Ernie Goss said circumstances specific to the meatpacking industry - including concerns about cattle losing weight if they are shipped long distances between feedlot and slaughtering plant - limit consolidation.

"It's unrealistic to think we'd have the same thing in meatpacking as what we've seen in the auto industry or airline industry," Goss said.

Several beefpacking plants have closed around the country in the last two years, and others have run at below capacity, in part because of the mad cow issue, and the meatpacking industry has lost about 10,000 jobs, according to officials at the American Meat Institute.

The trend also has affected the Midlands. A Smithfield Foods plant in Gering that employed more than 200 people closed its doors last August, and Iowa Quality Beef shuttered its plant in Tama, Iowa, in August 2004.

Cattle supplies have begun increasing, however, and the beef trade is improving as foreign markets slowly open to American beef, Feuz said. Both factors should help improve meatpacking companies' profit margins, he said.

Analyst Pablo Zuanic of JP Morgan said cattle supply growth will be slow, and the meatpacking business will remain difficult this year.

"Given very gradual growth in cattle supplies, we expect little improvement in packer economics," Zuanic said in a report this week on the U.S. meat industry.

A spokesman for Minneapolis-based Cargill, Mark Klein, said his company did not anticipate any closings, in part because Cargill's five plants around the country combine slaughter and processing operations.

Workers at Tyson's West Point plant slaughtered the cattle and employees at its Norfolk plant boxed the beef. The company's Dakota City plant, on the other hand, does both.

"We're in a different situation," Klein said. "(Tyson) could gain efficiency by doing it all in Dakota City."

Like much of the industry, Cargill has been running its plants below capacity because of low cattle supplies and fewer overseas markets, Klein said. However, the number of cattle in the country ebbs and flows, and cyclical supplies always will be part of the industry, Klein said.

"Regardless of where we are in the cattle cycle, we still have customers to prepare for and plants to run," Klein said.

Swift & Co., based in Greeley, Colo., did not see any closings on the horizon, spokesman Sean McHugh said.

"We have no knowledge of any pending closures within the industry," McHugh said. "What you're seeing is a rational and very businesslike decision by Tyson to pull that capacity off the market."

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