January 7, 2004

 

 

Tyson's Beef Plants Cut Operating Time Following Mad Cow Case

 

Tyson Foods Inc., the United States' largest beef producer, will continue to cut operating hours at its plants while assessing the potential impact of the country's first mad cow case.

 

Tyson operates 11 beef processing plants in the United States and one in Canada, late last year cut hours at many of the plants amid tight supplies and a seasonal slump in demand. "We plan to keep the plants at reduced hours while we evaluate the effect of the discovery of mad-cow," said Gary Mickelson, a spokesman with Tyson in Dakota Dunes, S. D..

 

In October, Tyson reduced hours at some of its beef slaughter plants because of dwindling supplies of market-ready cattle after the outbreak of mad-cow disease in Canada in May.

 

The company typically throttles up processing at its beef plants when the country moves into peak-summer grilling sea- son.

 

Tyson doesn't provide data on the amount of beef it processes.

 

But Mickelson said the company buys millions of cattle each year to supply its plants, which in turn produce billions of pounds of beef.

 

Analysts said the move by Tyson plays a part in the company's strategy to make the best of its beef business, the result of Tyson's $4.7 billion purchase of South Dakota-based meatpacker IBP Inc. two years ago.

 

Beef now accounts for about half of Tyson's $24 billion in annual revenue. "Even before the discovery [mad-cow], Tyson was seeing slower demand," said Brad Eichler, an analyst with the investment banking firm Stephens Inc. in Little Rock. "Tyson is more focused on margins instead of volume."

 

On Monday, Tyson's stock slipped 19 cents, or 1.44 percent, to close at $12.99.

 

The company's fourth-quarter sales for beef helped raise Tyson's fourth-quarter earnings for fiscal 2003 to $147 million, compared with $84 million for the same period a year ago.

 

But Tyson's share price has fallen 99 cents from the $13.98 it registered Dec. 23 after it lost access to foreign markets that have banned the import of American beef and beef products.

 

Tyson and other meatpackers are bracing for the impact on their business after more than 30 nations banned the import of U.S. beef after the announcement that a cow was diagnosed with mad-cow disease in Washington state in December.

 

While the meatpacking industry layoffs hasn't reported layoffs yet, on Monday analysts estimated the ban affected beef processing plants around the country.

 

Analysts estimated 95,000 head of cattle were slaughtered Monday, fewer than the 114,000 slaughtered the same day a year ago. "What's happening with Tyson is happening with the entire industry," said analyst Bob Wilson with HedgersEdge. com LLC, a livestock industry advisory and research firm in Colorado.

 

Tyson exported $1.7 billion in beef last year to countries like Japan and South Korea, which have halted U.S. beef imports.

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