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020111 IBP Cuts Beef Production at Four Plants

January 7, 2002

Chicago - IBP Inc. a unit of poultry giant Tyson Foods Inc. said it will reduce production for this week at four of its 10 U.S. beef plants, a move livestock analysts blame on slow beef sales and poor profits.

The four affected IBP plants are in Dakota City and Lexington, Nebraska, Finney County, Kansas, and Joslin, Illinois.

Excel Corp., the nation's third largest beef and pork producer and a unit of privately held agribusiness giant Cargill Inc., said on Monday that three of its six North American beef plants were running at slightly reduced capacity.

The affected Excel plants are in Schuyler, Nebraska, Fort Morgan, Colorado, and High River, Alberta, Canada.

The four IBP plants have a combined daily slaughter capacity of about 16,900 head, or about 13% of the daily U.S. slaughter, industry sources said. The combined daily slaughter of the two U.S. Excel plants is about 6,700 head.

The production cuts were reflected in Monday's cattle slaughter, which USDA estimated at 114,000 head. During normal production daily slaughter will be about 130,000 head.

IBP said it would cut beef production this week to slightly less than 40 hours at each of the four plants. Depending on market conditions, each plant can run up to 48 hours per week. No layoffs were involved at the IBP plants.

The extent of the production cuts at Excel were not available.

IBP cited market conditions for the action. Livestock analysts have said beef sales have been so slow that beef companies have struggled to earn profits.

“It is due to the difficulty in raising wholesale (beef) values to levels to cover the cost of the cattle plus production costs,” said Andrew Gottschalk, livestock analyst with Denver-based HedgersEdge.Com LLC, who estimated beef companies were probably breaking even on beef sales.

Part of the problem is that cattle prices have increased about $4.00 per hundredweight since late December, while the prices that packers receive for beef have been flat.

Domestic beef sales have been hurt by a drop in restaurant business because of the sluggish economy and reduced travel after Sept. 11, sources said.

“We are still in a semi-recession. We no longer have record meat demand,” said Jim Clarkson, livestock analyst with Chicago-based A. & A. Trading Inc.

Beef exports have also been hurt because consumers in Japan, a top buyer of U.S. beef, ate less beef after the discovery of mad cow disease in that country.

“I believe overall demand will be quite anemic throughout the first quarter,” said Gottschalk.


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