Tyson to restart operations as Canadian trade reopens
plans to resume production at several idled beef plants over the
next two weeks as supplies are expected to improve in the coming
months.
Much of this optimism is tied to the possibility of resuming live cattle trade with Canada. Both countries have agreed to slowly re-open their border for live cattle shipments on 7 March 2005, which should pave the way to increased beef supplies.
The beef trade with Canada was suspended after the first case of bovine spongiform encephalopathy was discovered in a Canadian cattle herd in 2003.
"While cattle numbers remain tight, we believe supplies will improve in the months ahead," Tyson chief executive John Tyson said in a statement.
This will certainly come as a relief for the 2,100 workers affected by the temporary suspension across a number of plants, and will go some way to reassuring the meat processing industry that an upturn is expected.
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.
"We know how difficult this suspension has been for our team members and our plant communities," Tyson said last week. "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."
The decision by the United States Department of Agriculture (USDA) to reopen the Canadian border to live cattle and additional beef products should therefore improve matters, though Tyson has warned that the beef industry has a long way to go before achieving normality.
Once its plants resume operations, they will likely still operate at reduced levels until market conditions improve due to weak beef demand brought on by high prices.
The company said it typically sees seasonal improvement in beef sales moving into the spring and summer and it hoped cattle prices would moderate and lead to lower beef prices. In addition, the company believes that the US beef industry remains months away from resuming meaningful exports to the Far East.
The lucrative billion-dollar market in Japan has been closed to US beef processors following the country's first case of Mad Cow Disease in 2003. The US has been pressuring Japan to resume imports of American beef, but talks have continually stalled over Japan's insistence that the United States follow it practice of a blanket test on all slaughtered cattle, or adopt an equivalent measure.
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.
