Dive Brief:
- Tyson Foods said it would close or sell three beef plants as the meat giant shrinks its manufacturing footprint to contend with higher costs from an ongoing cattle shortage.
- The company will end operations at a beef plant in Joslin, Illinois, and a case-ready facility in Eagle Mountain, Utah, the company said Thursday. Tyson is also pursuing a sale of a beef plant in Pasco, Washington.
- Production from those locations will shift to other facilities with more capacity. Tyson will ramp back up a second shift at its Amarillo, Texas, plant after consolidating production at the facility and laying off approximately 1,760 workers late last year.
Dive Insight:
The closures come days after the company’s beef segment reported an operating loss of $138 million, with executives acknowledging that previous moves to close plants have not been enough to offset the hit to profits.
Tyson last fall closed one of its largest beef processing plants in Lexington, Nebraska, a move that led to layoffs of more than 3,000 workers.
The company says it will anchor its beef facilities in three locations in the central U.S.: Dakota City, Nebraska; Holcomb, Kansas; and Amarillo, Texas. The consolidation will help Tyson “create a more competitive footprint amidst one of the most historic cattle shortages the country has ever experienced,” the company said in a statement.
The closure in Joslin, Illinois, will lead to the layoffs of around 2,500 union workers in the region, according to a statement from federal officials representing the state. It’s unclear how many workers will be laid off from Tyson’s Eagle Mountain, Utah, facility, but the company previously said the plant was capable of employing between 800 and 1,200 people .
U.S. cattle herds are at lows not seen in decades, according to the USDA, with many ranchers hesitant to rebuild after years of climate challenges and tough economics. The resurgence of a flesh-eating pest called the New World screwworm has also further threatened supply and made it more difficult for the U.S. to import beef from Mexico.
Although the Trump administration has taken steps to reopen trade with the southern border, Tyson CEO Donnie King said in an earnings call that it “will not solve the entire gap of beef losses we are currently seeing.”
In its statement announcing the closures, Tyson said that supply constraints are likely to persist, “requiring strategic action.” The changes to its manufacturing network will allow Tyson to maintain a similar level of cattle harvesting across a more streamlined network, the company added.
Consumers have shifted away from beef as prices continue to soar, with the average retail beef price reaching an all-time high of $9.64 in April. Total meat department sales declined 2.3% in June, according to Circana data, as higher costs pressured consumers already sensitive to grocery inflation.
The environment has pushed other beef companies to restructure their manufacturing networks, with giant JBS announcing the closure of two plants earlier this year. JBS also named a new CEO after reporting a $102 million net loss for the second quarter from high beef costs and other nonrecurring expenses.
