October 11, 2006

US beef industry cuts production

The US beef market is looking anything but bullish as two top US beef processing companies announced on Tuesday (Oct 11) they would be cutting production due to poor sales both at home and abroad at a time of high cattle prices.

Tyson Foods and National Beef Packing Company both announced they are cutting production, while Swift & Co. said it would continue operating at reduced levels.

The news did not surprise the market as analysts have been expecting reductions due to the fact that beef companies have been incurring losses recently.

This time of the year has traditionally been a low season for beef companies, Jim Robb, an economist at the Livestock Marketing Information Centre said.

High energy prices and interest rates have cut consumer spending and hurt beef sales, economists said, with lower prices for competing products like pork and chicken making a bad situation worse.

Export levels in Japan, who lifted its ban on US beef only recently, have a long way to go before they reach profitable levels. Although South Korea has lifted its ban on US beef, no shipments have left the US because of exporters reservations over stringent requirements.

Tyson Foods said it would slaughter about 12,000 fewer cattle per week for the next six to eight weeks while National Beef said it would cut production 7.5 to 23 percent at its plants.

The market is not expected to improve over the next several months, National Beef said.