NOBULL: Cargill to idle beef plant that employs 2,000 — The carcass is picked clean – time to move on.

Cargill to idle beef plant that employs 2,000

By Dani Friedland on 1/17/2013

Cargill will idle its beef processing facility in Plainview, Texas, at the end of business on Feb. 1, the company announced Thursday.

Wichita, Kan.-based Cargill cited tight cattle supply associated with years of drought in Texas and the southern Plains states.

Approximately 2,000 people work at the Plainview plant. Cargill says it will provide them with support as well as help finding and filling open positions, either at other Cargill locations or with other employers, and the company will honor its community commitments in Plainview for 2013.

“The decision to idle our Plainview beef processing plant was a difficult and painful one to make and was made only after we conducted an exhaustive analysis of the regional cattle supply and processing capacity situation in North America,” said John Keating, president of Cargill Beef, in a statement. “While idling a major beef plant is unfortunate because of the resulting layoff of good people, which impacts their families and the community of Plainview, we were compelled to make a decision that would reduce the strain created on our beef business by the reduced cattle supply. The U.S. cattle herd is at its lowest level since 1952. Increased feed costs resulting from the prolonged drought, combined with herd liquidations by cattle ranchers, are severely and adversely contributing to the challenging business conditions we face as an industry. Our preference would have been not to idle a plant.”

Cargill will take steps to preserve the plant’s infrastructure for potential reopening, though it does not expect the U.S. cattle herd to significantly increase in the coming years.

Cattle destined for the Plainview plant will instead go to Cargill’s facilities in Friona, Texas; Dodge City, Kan.; and Fort Morgan, Colo.

Market reaction

Tyson shares were outperforming the market in afternoon trading on the New York Stock Exchange. Tyson shares rose 78 cents to $21.24, a 3.81 percent gain. "Investors are correctly interpreting the Cargill announcement as a positive for Tyson, in our view," JP Morgan analyst Ken Goldman said in a note to investors.

Goldman also noted that the Plainview plant processes some 6 percent of fed cattle in the U.S.