(Photo illustration by Cheng Xin/Getty Images)
Tyson Foods announced Thursday that it plans to close two facilities and seek a buyer for a third as part of what the company described as "strategic changes" to its beef operations.
What they're saying:
According to a Tyson Foods news release, the company will cease operations at its beef plant in Joslin, Illinois, and its case-ready facility in Eagle Mountain, Utah. Tyson is also pursuing the sale of its beef facility in Pasco, Washington.
"Tyson Foods will anchor its beef business around three strategically located beef facilities in the central United States: Dakota City, Nebraska; Holcomb, Kansas and Amarillo, Texas, to create a more competitive footprint amidst one of the most historic cattle shortages the country has ever experienced," the meatpacking giant said.
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Dig deeper:
The company cited recent data showing that heifer retention remains limited, an indication that constrained cattle supplies could continue.
"Recent USDA cattle inventory data, which included continued evidence of limited heifer retention, indicates these supply constraints are likely to persist, requiring strategic action," the company said.
What's next:
Production capacity from the Illinois and Utah facilities will be moved to other Tyson locations that the company said have "ample capacity to grow."
Tyson also plans to ramp its Amarillo, Texas, facility back up to a second shift as cattle supplies increase.
"These changes will allow the company to maintain a similar level of cattle harvesting across a more efficient and modern network," the news release states.
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Tyson said it will also support employees affected by the facility closures.
"The company is committed to supporting our team members through this transition, including helping them apply for open positions at other facilities," Tyson said.
Big picture view:
The restructuring comes as U.S. consumers continue to contend with high beef prices, while meatpackers face constrained cattle supplies and rising costs.
The U.S. cattle herd has dropped to historically low levels after drought conditions reduced available forage in major ranching regions, prompting ranchers to reduce their herds.
Tyson executives recently acknowledged those challenges during the company's earnings call. CEO Donnie King said, "Beef hasn't performed the way we expected, and we're not pretending otherwise."
The Source: FOX Business contributed to this report. This story was reported from Los Angeles.