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Summary of diving:
- Tyson Foods is closing one of its largest beef processing plants and laying off more than 3,200 workers because of a shortage of U.S. cattle at pressing operations for large meatpacks.
- The meat giant revealed in a statement that it is closing operations at its meatpacking plant in Lexington, Nebraska. It will also reduce beef production in Amarillo, Texas, to one full-capacity shift.
- Tyson said the move was necessary to “right-size the beef business and position it for long-term success.” Increases production at other beef facilities to meet customer demand and compensate for lost plant volume.
Diving Insights:
Tyson is in decline as U.S. cattle herds are at their lowest level in 75 years and many ranchers are hesitant to rebuild after years of climate challenges and a tough economy. The re-emergence of a meat-eating pest called screwworm in the New World has also further threatened supplies, making it more difficult for the United States to import beef.
As a result, beef prices have risen, with ground beef costing more than $6 a pound since September. The dynamic has squeezed earnings at some of the biggest meatpackers, which are now paying more for beef and looking for ways to recoup those costs.
While Tyson’s beef sales have been buoyed by rising prices, executives acknowledged to investors earlier this month that higher beef costs have outpaced higher sales. To meet these challenges, the company plans to “prioritize efficiency, reduce costs and introduce innovative products,” according to CEO Donny King.
According to news reports, the Tyson beef plant in Lexington had the capacity to process 5,000 head of cattle per day, roughly 5 percent of the daily beef slaughter in the United States. This factory, which has been operating since 1990, produces fresh cuts of beef such as ribs, loins, chucks and rounds, as well as various minced meat products.
In 2015, Tyson invested $47 million to expand the plant, calling it “an important part of the beef business.” In 2022, the meat giant also announced a $200 million investment in its Amarillo, Texas, plant, one of the largest in the company’s network.
Plant closures can destabilize rural communities where meatpackers are typically the biggest employers. The Lexington plant is expected to affect 3,200 jobs in a community of about 11,000.
Nebraska state Sen. Deb Fischer said she was “very disappointed” by Tyson’s closing.
“Nebraska is a beef state, and we know the ups and downs of the beef market better than anyone. It’s no secret that just a few years ago, packers like Tyson were reaping windfalls while the rest of the industry was consistently in the red,” he said in a statement.
Lawmakers have already stepped in to force meat packers to reconsider the shutdown. Tyson’s plans to close two poultry plants in Missouri have angered the state, prompting Sen. Josh Hawley to introduce a bill to eliminate poultry monopolies.
Nebraska Gov. Jim Palin said in a statement that the state’s cattle industry is resilient, and Tyson pledged to work on future value-added opportunities in the state.
“The big picture – our excellent cattlemen and cattle feeders have emerging opportunities and will continue to market Tyson as its planned reorganization increases capacity and jobs at other Nebraska mills,” Peelen said. The State of Nebraska is ready to build for the future and do everything it can to support employees affected by this change.
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