Meat + Poultry - March 2006 - 3

March 2006

THE FRONT PAGE
Smithfield considers building a new beef
processing plant in Southwest
SMITHFIELD, Va. - Smithfield Foods,
Inc. has announced plans to build at least
one beef processing plant in the Southwest United States. The company has secured land close to its feedlots for processing facilities, said C.E.O. Joseph
Luter during a conference call with financial analysts on
March 1.
Cattle
feedlots
in Texas, Oklahoma, Colorado, Kansas
and Idaho that Smithfield and its partner,
ContiBeef, already operate would supply
the plant. The facility is expected to cost
about $150 million, half of which is likely
to be assumed by an unnamed partner, according to Luter.
"We'll be applying for permits very
shortly," he said. And he noted that a
second processing facility could be
added later, if financially justified, as
the feedlots have enough cattle to sup-

ply two plants.
"It might sound crazy today," Luter
said, referring to heavy beef losses incurred by other packers. "But I do believe the cycle will turn around."
Cattle Buyers Weekly initially disclosed the company's plans for a
new plant in April
2005, and Smithfield
quickly
downplayed its intentions. Smithfield's
beef operations reported a $2.2 million operating profit for the fiscal third
quarter ended Jan. 29, which analysts
have described as remarkable considering the losses by other processors such
as Tyson Foods, Springdale, Ark.
Smithfield's new plant most likely
would not be ready for operation until late 2008. CBW says that it could
put the future of Swift & Co.'s Dumas, Texas, plant at risk because of the

U.S. Premium Beef plans to acquire
Brawley Beef
KANSAS CITY, Mo. - U.S. Premium Beef, L.L.C. has entered into a nonbinding letter of intent to acquire Brawley Beef, L.L.C. National Beef Packing Co., of which U.S.P.B. is the majority owner, will own and operate the
Brawley Beef business. The parties expect to enter into a definitive agreement
following due diligence.
Brawley Beef, Brawley, Calif., is an alliance of cattle producers in Arizona and California who supply its meatpacking operations with more than
400,000 head per year. The company was formed by its suppliers in 2001.
National Beef Packing Co., the fourth-largest beef processing company
in the United States, reported year-end earnings of $20.8 million in August
2005, compared with earnings of $44 million in 2004.
At the time, company officials told analysts that the continued high cost for
live cattle and lack of imports squeezed profit margins.

age of that plant, which was built in
the late 1960s, and because that plant
buys a lot of its cattle from the Smithfield/ContiBeef joint venture, Five
Rivers Ranch Cattle Feeding. More
than half of the 1.6 million cattle fed
on Five Rivers' 10 feedlots went to
Swift in 2004. National Beef Packing
Co., Kansas City, Mo., could also be
impacted as it also was a heavy buyer
from Five Rivers.

U.S.D.A. confirms third
case of B.S.E.
WASHINGTON - The U.S. Dept. of Agriculture has announced the discovery of
the third case of bovine spongiform encephalopathy in the United States. The
animal has been identified as being nonambulatory and coming from a farm in
Alabama. The carcass was buried on the
farm and did not enter the U.S. food supply or feed chain.
According to Dr. John Clifford, chief
veterinary officer for the Animal and
Plant Health Inspection Service, the animal, which is a beef breed, has only been
at the farm less than a year.
"Efforts to determine the age of the
animal are ongoing," said Clifford.
"The attending vet said, based on dentition, the age of the animal could have
been upwards of 10 years of age. If
that is true, it would indicate the animal was born prior to the implementation of the feed ban."
Clifford said U.S.D.A. is now attempting to determine the animal's history and will provide updates as the situation develops.

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Meat + Poultry - March 2006

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