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Diving overview:
- Tyson Foods will close one of its largest beef processing plants and lay off more than 3,200 employees as a U.S. cattle shortage increases operating pressures on major meatpackers.
- The meat giant said in a statement that it would cease operations at its meatpacking facility in Lexington, Nebraska. It will also reduce production at its beef facility in Amarillo, Texas, to a single full production shift.
- Tyson said the move was necessary “to right-size our beef business and position it for long-term success.” We will increase production at our other beef facilities to meet customer demand and offset production losses from the closed plants.
Dive Insights:
Tyson is cutting costs as the U.S. cattle herd has reached a 75-year low, according to the USDA, and many ranchers are hesitant to rebuild after years of climate problems and difficult economic times. The resurgence of a meat-eating pest called the New World screwworm has further threatened supplies and made importing beef into the United States more difficult.
Accordingly, beef prices also soared, with the price of ground beef exceeding $6 per pound as of September. The dynamic is putting pressure on the profits of some large meatpackers, who are now paying more for beef and looking for ways to offset those costs.
Tyson’s beef sales have increased due to higher prices, but management acknowledged to investors earlier this month that higher beef prices have outpaced sales growth. To address these challenges, the company plans to “prioritize efficiency, reduce costs and introduce innovative products,” according to CEO Donnie King.
According to news reports, the Tyson beef plant in Lexington has the capacity to process 5,000 head of cattle per day, which is nearly 5% of the daily beef slaughter in the United States. In operation since 1990, the plant produces fresh beef cuts such as ribs, sirloins, chucks and rounds, as well as a variety of ground beef products.
In 2015, Tyson invested $47 million to expand the plant, calling it “an important part of our beef business.” In 2022, the meat giant also announced a $200 million investment in its Amarillo, Texas, plant, one of the largest plants in the company’s network.
Plant closures could shake up rural communities where meatpackers are the largest employers. The Lexington plant is expected to impact 3,200 jobs in a community of about 11,000 people.
Nebraska U.S. Senator Deb Fischer said she was “very disappointed” by the Tyson closure.
“Nebraska is the beef state, and we know the highs and lows of the cattle industry better than anyone. It’s no secret that just a few years ago, packers like Tyson were making huge profits while the rest of the industry continued to lose money,” she said in a statement.
Lawmakers have previously intervened to force meatpackers to reconsider the closures. Tyson’s plan to close two poultry plants in Missouri has drawn outrage from the state and prompted Sen. Josh Hawley to introduce legislation to break up the poultry monopoly.
Nebraska Governor Jim Pillen said in a statement that the state’s livestock industry is resilient, adding that Tyson is committed to the state’s future value-adding opportunities.
“The big picture – our great ranchers and cattlemen have new opportunities and we will still sell the Tyson market as the planned reorganization will increase production capacity and jobs at our other Nebraska plants,” Pillen said. “Nebraska is ready to build for the future and do what we can to support our employees affected by these changes.”
