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Plant news drops cattle prices the limit

01/17/2013 @ 1:03pm

Cargill Inc., one of the world's largest beef producers, said it will close a Texas processing plant due to dwindling cattle supplies caused by drought in the central U.S.

The Minnesota-based company said it would close the plant in Plainview, Texas, on Feb. 1, affecting 2,000 employees.

Although Cargill will preserve the plant's infrastructure so that it could possibly reopen when cattle supplies rebound, Cargill said it does not expect that to happen "for a number of years."

News of Cargill's move sent U.S. live-cattle futures down by their exchange-imposed daily limit of three cents Thursday. Live-cattle futures for February delivery were down about 2.3% at the Chicago Mercantile Exchange, at $1.255 a pound.

"While idling a major beef plant is unfortunate because of the resulting layoff of good people, which impacts their families and the community of Plainview, we were compelled to make a decision that would reduce the strain created on our beef business by the reduced cattle supply," said John Keating, president of Cargill Beef, based in Wichita, Kansas.

Severe drought across the central and southern Plains over the past two years has stifled cattle ranchers, many of whom culled their herds in the face of soaring costs for hay, corn and other livestock feed. Dwindling pastureland has also hurt the U.S. cattle supply. The size of the nation's cattle herd is the smallest in six decades, according to federal data.

Corn prices hit a nominal record high last summer. Severe drought conditions persist in Plains states from Texas to Kansas, while the drought has eased somewhat in big Midwestern farm states like Indiana and Illinois. Mr. Keating said that while the beef industry has endured such cycles in the past, the current cycle is longer and more severe.

Cattle previously processed at the Plainview plant will instead be processed at other plants in Texas, Kansas and Colorado.

Cargill, the largest private U.S. company in terms of revenue, said there was too much industry processing capacity in the Texas panhandle, with four plants. Other Cargill plants around the country will not be affected. Mr. Keating said the company has invested $766 million in its U.S. beef plants over the past decade.

"Our long-term commitment to U.S. beef production is unwavering," he said.

Cargill said it would assist the displaced employees in trying to find jobs at other Cargill plants or with other companies.

Write to Ian Berry at ian.berry@dowjones.com

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(END) Dow Jones Newswires

January 17, 2013 13:15 ET (18:15 GMT)

DJ Cargill to Close Texas Beef Plant, Citing Drought, Cattle Supply->copyright

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