October 23, 2006

Industry analysts give new Smithfield plant the thumbs-down

The plan by Smithfield Beef Group and ContiGroup for a US$200 million beef plant in the Texas Panhandle has met with opposition from  industry analysts who say the plant would hurt the industry.

The two companies announced last week that the plant, scheduled to be opened in 2008, would hire 3,000 employees and has a processing capacity of 5,000 head of cattle a day.

JP Morgan Chase analyst Pablo Zaunic said in an opinion column that a plant that size would add too much capacity to the beef industry and affect the overall health of the industry.

He also questioned whether Smithfield made the move to force competitor HM Capital Partners to sell its Swift beef processing plants.

The industry is also trying to block Smithfield's bid to buy over Premium Standard Farms, the second largest pork processor in the US for US$810 million. Various consumer and producer organisations are hoping to block the deal through anti-trust hearings.

Smithfield recently completed its acquisition of the branded meats business of ConAgra for US$571 in cash.