It’s too soon to determine the effect on cattle prices of Tyson Foods Inc.’s decision to close its Idaho beef plant and scale back operations in Washington state, says an industry analyst.
Steve Kay, editor of Cattle Buyers Weekly, said prices could soften a bit but Tyson will still have to remain competitive.
Producers in the Pacific Northwest and southern Alberta will likely see some impact.
“Tyson will not be as aggressive in the marketplace,” Kay said Aug. 21. “It’s very difficult to know.”
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Canadian cattle market analysts Canfax said the closure could lead to a weaker basis between Washington and Nebraska.
In turn, that could lead to a weaker Alberta-U.S. basis, it said.
Tyson announced Aug. 17 that its beef slaughter plant in Boise, Idaho, will close permanently on Oct. 16 and put 270 people out of work. That plant has capacity to kill 1,600 head per day or 470,000 annually.
In Pasco, Wash., Tyson operated one slaughter shift and two processing shifts. That will be trimmed back to just one processing shift and affect 500 jobs. Pasco’s daily capacity is 2,200 head.
Before May 2003, between 20 and 25 percent of Pasco’s supply came from Canada. No Canadian cattle went to Boise.
Kay said Tyson has closed other slaughter-only operations because those types of plants can’t be operated efficiently.
“It’s become apparent for some time that there is overcapacity in the United States,” he said. “Slaughter-only plants are rapidly becoming an anachronism. They’re not competitive.”
When Tyson purchased IBP’s beef packing assets in 2001, it inherited three such plants; two are now closed or will close.
Freight costs have escalated due to rising fuel prices and it is no longer worthwhile to ship carcasses more than 400 kilometres from Boise to Pasco for processing, Kay said.
The downsizing is also a result of fewer cattle being fed in the region, the two-year closure of the Canadian border and other industry takeovers.
“The Boise plant has performed reasonably well for many years, however, market and economic conditions have changed,” said Jim Lochner, Tyson senior group vice-president.
Boise and Pasco were both running at less than 70 percent capacity.
“Tyson could see that things weren’t really going to get much better,” said Kay.
He said Tyson did not implement cuts at its Lakeside Packers facility in Brooks, Alta., because its investment there is too great. That plant is facing a labour shortage as it moves to a second shift. Kay said it has hired workers from as far away as China, the Philippines, El Salvador and Ukraine, and still has only about 140 of the 400 people it needs.
He added that if Lakeside can sort out those issues, it might benefit from Tyson’s changes, as fewer slaughter cattle move south due to shipping costs.
Tyson lost more than $217 million US on its beef side in the first three quarters of fiscal 2006, said Kay. The company earlier this year consolidated plants in Nebraska as it works to bring that part of its business back to profitability.
