Tyson plant suspensions to continue through February
operations at some Tyson Foods beef plants will continue through 12
February and may extend beyond that date, underlining the ongoing
precarious state of the US beef industry.
About 2,100 workers are affected by the temporary suspension.
Unfavourable market conditions, including tight cattle supplies, soft domestic beef demand and the continued absence of key export markets, prompted Tyson to temporarily suspend a number of processing operations on 10 January. The world's largest meat firm originally expected the temporary suspension to last three to five weeks, but based on daily evaluations of current market conditions, the company now expects the suspension to last at least five full weeks.
"We know how difficult this suspension has been for our team members and our plant communities, however, market conditions have not improved enough to warrant resuming operations," said John Tyson, chairman Tyson Foods. "We need more cattle to run these plants.
"The US beef industry is currently out of balance with far more slaughter capacity than available cattle. That's why reopening the US border to Canadian cattle is so important. While we remain optimistic this will happen as scheduled, we're concerned about attempts to delay it."
Another factor has been the loss of the Japanese export market. It was the number one market for US beef exports before an import ban was put in place following the discovery of BSE in the US.
Japan tests all of its cattle for mad cow disease at slaughter, and has indicated that the US should do the same if it wants to restart importing beef into the country. US beef exporters are chomping at the bit to restart exports. The Japanese market is highly lucrative and the country is currently running low on stocks.
Another issue has been consumer confidence. Though US consumers tend to be more trusting than their European counterparts, the spectre of BSE has nonetheless had an undeniable impact on public perceptions of beef.
Last year, a Wall Street Journal Online/Harris Interactive Health-Care Poll in the US showed that one in every five American adults - 21 per cent - said that fear of mad cow disease would change their eating habits, while 78 per cent of these people said that they would eat less beef.
Some 16 per cent indicated that they would stop eating beef altogether.
The suspensions top off a difficult first quarter for the meat processing giant. For the first fiscal quarter ended 1 January 2005, operating income was $129 million compared to $161 million and net income was $48 million compared to $57 million for the same period last year.
Tyson's beef unit posted a net operating loss of $16m, compared to a loss of $29m last year. However excluding the impact of a one-time gain from a vitamin anti-trust settlement, the first quarter loss at beef was $58m.
Tyson Foods is the world's largest processor and marketer of chicken, beef, and pork and the second-largest food company in the Fortune 500. The group operates in more than 80 countries.
