050124 Tyson Closures Reflect State Of US Beef Industry

Springdale, AR - Tyson will suspend operations at plants in Denison, Iowa; Norfolk and West Point, Nebraska; and Boise, Idaho. The company will also temporarily discontinue second shift processing at Pasco, Washington. The suspension of operations is expected to last three to five weeks and will reduce the company's weekly cattle slaughter by 25,000 to 30,000 head, compared to pre- Christmas levels.

Approximately 2,100 workers are affected by the temporary suspension of operations.

"This is a difficult decision, however, we believe it's the right thing for us to do at this time, especially given the challenging market conditions and unfavourable operating margins our beef business continues to face," said John Tyson, chairman and CEO of Tyson Foods.

"Our plants have been running at less than 75 per cent of capacity over the past two months, which is 10 to 15 per cent below historical levels."

The loss of the Japanese export market has been a huge blow to US beef processors. 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.

As a result, US cattle marketings were down more than 8 per cent in 2004, though Tyson remains confident that the market will pick up. "We anticipate cattle numbers will increase in the coming months," said Gene Leman, senior group vice president of Tyson Fresh Meats.

"We also look forward to the previously announced reopening of the US border to Canadian cattle in early March, which will especially benefit our plants in the Upper Midwest and Pacific Northwest."

Based upon the company's outlook for fiscal year 2005, the company now estimates its fiscal 2005 diluted earnings per share to be in the range of $1.15 to $1.40. The company still expects the majority of its earnings to occur in the last six months of the fiscal year.

Tyson Foodsis 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.

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