Springdale, Arkansas-based Tyson Foods, the world’s largest processor and marketer of beef, chicken and pork, has unveiled its plans to restructure its live swine operation in order to more effectively position the group for the future.
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The restructuring will result in the elimination of approximately 200 jobs, the closure of company-owned and leased hog farms, and discontinuing relationships with 132 contract hog producers in Arkansas and eastern Oklahoma. All together, 159 farms will be affected.
Chairman and CEO John Tyson explained: “When we created the new company last year, we committed to analyzing all parts of our business, and after careful review, we found it necessary to make changes within our live swine operation.
“Restructuring this group was a difficult business decision because it affects team members and contract hog producers, but it was one that had to be made based on our analysis. We’ve been running this division at an operating loss. Therefore, it is now time to do what we must to try and ensure the long-term viability of the remaining part of this business.”
While the move will reduce Q4 pre-tax earnings by about US$20-30m, it is expected to have a positive impact on the future earnings potential for the Tyson’s pork operations.
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By GlobalDataThe move will reduce the total number of sows by 30% in the live swine operation from about 100,000 to about 70,000, and will reduce finishing farms by 83%.
Transportation costs of both finished hogs to Midwest processing facilities and grain to the southern finishing operations was a critical factor in the decision. The primary competitors in the live swine business have finishing operations nearer to packing facilities, avoiding the competitive disadvantages of higher transportation costs for both finished hogs and grain.
Tyson will retain its hog breeding operations in the Holdenville, Oklahoma area, and a limited number of farms in northwest Arkansas, both will provide 11 pound weaned pigs to finishing operations in the Midwest. The transportation cost of these pigs is not as
critical a factor as with finished hogs. The company will also retain some contract hog producers finishing operations in north central Missouri, closer to Midwest processing operations and grain supplies.
The phase-out of the operations will begin this week, and should be complete in Tyson’s Q2 in March 2003. Tyson representatives will begin meeting with hog producers immediately to discuss their options.
