Tyson announces changes within its beef segment

Tyson Foods has planned a major overhaul of its flagship beef processing facility in Dakota City, Neb. in an effort to raise operating efficiencies by mid-2013.

The company’s past efforts to invest in plant upgrades have been fruitful in terms of cost savings with respect to operating expenses, analysts said.

Springdale-based Tyson announced Thursday (Mar. 1) a multi-million upgrade to the near 50-year-old Dakota City plant. The major expansion will allow Tyson to add 200 jobs and increase slaughter capacity, but will also likely mean the closing of a smaller beef facility in Dension, Iowa.

“We expect it (Dakota City) to continue to be one of our top performers and an important market outlet for the region’s cattle producers,” said Noel White, senior group vice president of Tyson Fresh Meats.

He said the improvements are needed to enhance the product mix for domestic and international customers and make the Dakota City plant more competitive. The plant employs 4,000 with an annual payroll of $140 million. The company spent more than $1.7 billion in fiscal 2011 to buy cattle to supply the Dakota City plant.

A majority of the cattle currently handled by the Denison plant are purchased from independent cattle operations that are actually located closer to Dakota City, the release noted. There are 400 workers in the Denison plant..

“It’s difficult to consider the possibility of closing our Denison plant, given the impact on our people, the plant’s long history in the meat industry and the tremendous support we’ve received from the community over the years,” said White. “However, unless area cattle supplies increase significantly or we find an alternative use for the facility, it may make economic sense to discontinue operations there next year.”

Bob Wilson, analyst with HedgersEdge.com, said cattle supplies are shrinking in the Denison area. He said beef packers were still operating in the red, losing an average $18 a head as this week.

If Tyson proceeds with the Denison closing in 2013, the company will give a 60 day notice, as required by law, and will also work with affected team members to explore job opportunities at other Tyson locations.

“The cattle on feed numbers out of Iowa continue to shrink, particularly with lots smaller than 1,000 head. Given that Denison is a slaughter only plant, carcasses have to be transported to the Dakota City for processing,” said Steve Kay, publisher of Cattle Buyers Weekly.

He said slaughter-only plants are becoming obsolete as companies look toward more efficient processing.

The Dakota City project is already under way. The work includes construction of a new beef slaughter floor that will incorporate the latest sanitation and production systems. The equipment upgrade includes state-of-the-art processes and technology designed to benefit animal handling, food safety, meat quality and workplace safety, the company said.

Tyson Foods reported $13.3 billion in beef sales last year, comprising 41% of the company’s $31.3 billion revenue.

U.S. Beef Marketshare
Cargill: 22%
Tyson Foods: 21%
JBS: 21%
National: 10%
Other: 26%

Source: Cattle Buyers Weekly